N-CSR 1 d22333.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-4813 -------------------------------------------- MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST ------------------------------------------------------------- (Exact name of registrant as specified in charter) One Boston Place, 024-0242 Boston, Massachusetts 02108 --------------------------------------------------------------- (Address of principal executive offices) (Zip code) Denise B. Kneeland Assistant Vice President and Secretary One Boston Place, 024-0242 Boston, MA 02108 --------------------------------------------------------------- (Name and address of agent for service) with a copy to: Christopher P. Harvey, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Registrant's telephone number, including area code: (617) 248-6000 ----------------------------------------------------------- Date of fiscal year end: September 30 ------------------------------------------ Date of reporting period: September 30, 2007 -------------------------------------- Item 1. Reports to Stockholders. MELLON INSTITUTIONAL FUNDS Annual Report Mellon Equity Large Cap Growth Fund -------------------------------------------------------------------------------- Year ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Management Discussion and Analysis -------------------------------------------------------------------------------- For the year ended September 30, 2007, The Mellon Large Cap Growth Fund had a total return of 17.5% compared to its benchmark, the Russell 1000 Growth index which returned 19.4%. The twelve-month period ended September 30, 2007 concluded one of the more challenging periods in recent memory as both credit and equity markets witnessed volatility increasing, risk appetites abating, and liquidity disappearing. An overheating China and an economic slowdown worried investors in February, but companies managed to continue to grow earnings, calming investors' fears through the second quarter. Continued deterioration in the housing market and signs of mounting credit losses at Wall Street banks ignited a flight to quality in July. Both occurrences witnessed global investors fleeing risky assets for the safety of liquid short-term investment vehicles. Investors bid up the price of cash causing liquidity around the world to cost more. With liquidity evaporating, many leveraged investors were forced to liquidate regardless of valuation conviction. Given the turmoil in the credit markets, where even the most creditworthy counterparties were hesitant to lend even overnight, the U.S. Federal Reserve first reduced its emergency discount window rate, and then reduced its Federal Funds rate. Both rate reductions of 50 basis points helped calm the marketplace as September ended. Although some fears have receded, concerns over economic growth, reacceleration of inflation, and monetary policy remain well entrenched. Energy and material related names led the Fund's benchmark, the Russell 1000 Growth Index, as investors sought value in hard assets. Financials and consumer cyclicals sectors were the worst performing sectors reflecting investors' concerns over further deterioration of the housing sector and the strength of consumer confidence. During the reporting period, the Fund underperformed its benchmark in an up market. Selection within the technology, consumer cyclicals, and telecommunication sectors contributed positively to performance. Companies differentiating themselves through cash generation continued to have positive performance. This was particularly the case within technology and the telecommunications sectors. Within consumer cyclicals, strong operating efficiencies were rewarded throughout the period. Health care, information and industrial sectors detracted from performance as oil services, drug, and internet related companies lagged their respective benchmark groups. Our approach involves the identification of those common stock attributes that are rewarded in a given market environment. We seek to capture market themes among equities by emphasizing the optimal combination of fundamentally based characteristics to identify good stocks. In addition, we use a disciplined construction process that provides a portfolio that is broadly diversified across economic sectors. Ronald P. Gala, CFA Jocelin A. Reed Portfolio Manager Portfolio Manager Mellon Equity Associates, LLP Mellon Equity Associates, LLP 2 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Comparison of Change in Value of $100,000 Investment in Mellon Equity Large Cap Growth Fund and the Russell 1000 Growth Index (Unaudited) --------------------------------------------------------------------------------
Mellon Equity PERIOD Large Cap Growth Fund Russell 1000 Growth Index* 12/21/05 100,000 100,000 12/31/05 98,650 100,000 3/31/06 101,700 103,094 6/30/06 97,755 99,072 9/30/06 101,813 102,971 12/31/06 108,264 109,074 3/31/07 108,615 110,370 6/30/07 116,340 117,937 9/30/07 119,615 122,900
Average Annual Total Returns (for period ended 9/30/2007) -------------------------------------------------------------------------------- Since Inception 1 Year 12/21/2005 -------------------------------------------------------------------------------- Fund 17.49% 10.59%
* Source: Lipper Inc. Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 3 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period(+) Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,101.30 $5.00 Hypothetical (5% return per year before expenses) $1,000.00 $1,020.31 $4.81
--------- + Expenses are equal to the Fund's annualized expense ratio of 0.95%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 4 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments ----------------------------------------------------------------------------------------- Microsoft Corp. Technology 3.7% Cisco Systems, Inc. Technology 3.2 Apple Computer, Inc. Technology 2.5 International Business Machines Corp. Technology 2.3 Pepsico, Inc. Consumer Staples 2.3 Google, Inc., Class A Information 1.9 Altria Group, Inc. Consumer Staples 1.8 Exxon Mobil Corp. Oil and Gas Producer 1.8 Amgen, Inc. Health Care 1.7 Hewlett-Packard Co. Technology 1.7 ---- 22.9%
* Excludes short-term securities and investment of cash collateral.
Percentage of Economic Sector Allocation Net Assets --------------------------------------------------------- Consumer Cyclicals 9.8% Consumer Hard Goods 0.5 Consumer Staples 7.7 Financials 7.4 Health Care 16.5 Industrials 8.6 Information 8.1 Materials 3.6 Oil And Gas Producer 8.3 Technology 24.5 Telecommunications 0.8 Utilities 0.9 Short-term and net Other Assets 3.3 ----- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--98.1% EQUITIES--96.7% Consumer Cyclicals--9.8% Best Buy Co., Inc. 400 18,408 Coach, Inc. 500 (a) 23,635 Costco Wholesale Corp. 550 33,753 Dick's Sporting Goods, Inc. 200 (a) 13,430 McDonald's Corp. 900 49,023 NIKE, Inc., Class B 600 35,196 Nordstrom, Inc. 500 23,445 Phillips-Van Heusen Corp. 200 10,496 Sotheby's Holdings, Inc., Class A 300 14,337 Target Corp. 450 28,606 Tiffany & Co. 200 10,470 Walgreen Co. 600 28,344 Wynn Resorts Ltd. 100 15,756 304,899 Consumer Hard Goods--.5% Harley-Davidson, Inc. 350 16,174 Consumer Staples--7.7% Altria Group, Inc. 800 55,624 Anheuser Busch Co., Inc. 400 19,996 Coca-Cola Co. 650 37,355 Kimberly-Clark Corp. 250 17,565 Pactiv Corp. 500 (a) 14,330 Pepsico, Inc. 950 69,597 Procter & Gamble Co. 350 24,619 239,086 Financials--7.4% Allstate Corp. 250 14,298 American Express Co. 800 47,496 First Marblehead Corp. 300 (b) 11,379 Franklin Resources, Inc. 200 25,500 Goldman Sachs Group, Inc. 200 43,348 IntercontinentalExchange, Inc. 100 (a) 15,190 JPMorgan Chase & Co. 300 13,822 Merrill Lynch & Co., Inc. 350 24,948 ProLogis--REIT 200 13,270 State Street Corp. 300 20,448 229,699 Health Care--16.5% Aetna, Inc. 400 21,708 Amerisourcebergen Corp. 400 18,132 Amgen, Inc. 900 (a) 50,913
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------- Health Care (continued) Becton Dickinson & Co. 500 41,025 Cigna Corp. 250 13,322 Davita, Inc. 200 (a) 12,636 Forest Laboratories, Inc. 500 (a) 18,761 Genentech, Inc. 300 (a) 23,406 Gilead Sciences, Inc. 300 (a) 12,261 Humana, Inc. 200 (a) 13,976 Intuitive Surgical, Inc. 100 (a) 23,000 Johnson & Johnson 650 42,705 Laboratory Corp. of America Holdings 100 (a) 7,823 McKesson Corp. 300 17,637 Medtronic, Inc. 650 36,666 Merck & Co., Inc. 800 41,352 Pfizer, Inc. 600 14,658 UnitedHealth Group, Inc. 800 38,744 Wyeth 900 40,095 Zimmer Holdings, Inc. 300 (a) 24,297 513,117 Industrials--8.6% Boeing Co. 450 47,245 Burlington Northern Santa Fe Corp. 200 16,234 Cummins, Inc. 100 12,789 Dover Corp. 300 15,285 Emerson Electric Co. 600 31,932 Fluor Corp. 100 14,398 Foster Wheeler Ltd. 100 (a) 13,128 Lennox International, Inc. 400 13,520 Manpower, Inc. 250 16,087 Parker Hannifin Corp. 150 16,774 Raytheon Co. 550 35,101 Waste Management, Inc. 600 22,644 Woodward Governor Co. 200 12,480 267,617 Information--8.1% Accenture Ltd., Class A 850 34,213 Akamai Technologies, Inc. 600 (a,b) 17,238 Cognizant Technology Solutions Corp., Class A 350 (a) 27,919 Equifax, Inc. 350 13,342 Google, Inc., Class A 100 (a) 56,727 McGraw-Hill Companies, Inc. 500 25,455 News Corp., Class A 1,000 21,990 Walt Disney Co. 1,250 42,987 Watson Wyatt Worldwide, Inc., Class A 300 13,482 253,353
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------- Materials--3.6% Celanese Corp., Class A 400 15,592 El Du Pont de Nemours & Co. 600 29,736 Monsanto Co. 550 47,157 Nucor Corp. 350 20,815 113,300 Oil And Gas Producer--8.3% ConocoPhillips 400 35,108 ENSCO International, Inc. 300 (b) 16,830 Exxon Mobil Corp. 600 55,536 GlobalSantaFe Corp. 300 22,806 Marathon Oil Corp. 400 22,808 Noble Corp. 400 9,620 Schlumberger Ltd. 400 42,000 Tesoro Corp. 300 13,806 Unit Corp. 200 (a) 9,680 Valero Energy Corp. 300 20,154 258,348 Technology--24.5% Apple Computer, Inc. 500 (a) 76,770 Applied Materials, Inc. 1,700 35,190 Autodesk, Inc. 350 (a) 17,490 Broadcom Corp., Class A 350 (a) 12,754 Cisco Systems, Inc. 2,900 (a) 96,019 Danaher Corp. 250 20,678 Dolby Laboratories, Inc., Class A 400 (a) 13,928 EMC Corp. 1,300 (a) 27,040 F5 Networks, Inc. 400 (a) 14,876 Harris Corp. 250 14,448 Hewlett-Packard Co. 1,000 49,790 Intel Corp. 1,250 32,325 International Business Machines Corp. 600 70,680 Linear Technology Corp. 450 15,746 Microsoft Corp. 3,750 110,475 National Semiconductor Corp. 400 10,848 Nokia OYJ--ADR 700 26,551 Nvidia Corp. 300 (a) 10,872 Oracle Corp. 1,700 (a) 36,805 Qualcomm, Inc. 600 25,356 Texas Instruments, Inc. 1,150 42,079 760,720
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------- Telecommunications--.8% NII Holdings, Inc. 150 (a) 12,323 SBA Communications Corp., Class A 400 (a) 14,112 26,435 Utilities--.9% Constellation Energy Group, Inc. 200 17,158 Sempra Energy 200 11,624 28,782 TOTAL EQUITIES (Cost $2,615,399) 3,011,530 INVESTMENT OF CASH COLLATERAL --1.4% BlackRock Cash Strategies L.L.C (Cost $43,900) 43,900 43,900 TOTAL UNAFFILIATED INVESTMENTS (Cost $2,659,299) 3,055,430 AFFILIATED INVESTMENTS--4.9% Dreyfus Institutional Preferred Plus Money Market 152,778 (c) 152,778 Fund (Cost $152,778) --------- TOTAL INVESTMENTS--103.0% (Cost $2,812,077) 3,208,208 LIABILITIES IN EXCESS OF OTHER ASSETS--(3.0%) (94,806) --------- NET ASSETS--100.0% 3,113,402 =========
Notes to Schedule of Investments: ADR--American Depository Receipt REIT--Real Estate Investment Trust (a) Non-income producing security. (b) Security, or a portion of thereof, was on loan at September 30, 2007. (c) Affiliated institutional money market fund. The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Statement of Assets and Liabilities September 30, 2007 --------------------------------------------------------------------------------
Assets Investment in securities, at value (Note 1A) (including securities on loan, valued at $130,819 (Note 6)): Unaffiliated investments (cost $2,659,299) $3,055,430 Affiliated investments (Note 1F) (cost $152,778) 152,778 Receivable for investments sold 39,050 Interest and dividends receivable 2,921 Prepaid expenses 2,965 ---------- Total assets 3,253,144 Liabilities Collateral for securities on loan (Note 6) $ 43,900 Payable for investments purchased 44,330 Accrued professional fees 35,287 Accrued accounting, custody, administration and transfer agent fees (Note 2) 12,828 Accrued shareholder reporting fees (Note 2) 1,222 Accrued trustees' fees (Note 2) 1,015 Accrued chief compliance officer fee (Note 2) 367 Other accrued expenses and liabilities 793 -------- Total liabilities 139,742 ---------- Net Assets $3,113,402 ========== Net Assets consist of: Paid-in capital $2,363,385 Accumulated net realized gain 346,050 Undistributed net investment income 7,836 Net unrealized appreciation 396,131 ---------- Total Net Assets $3,113,402 ========== Shares of beneficial interest outstanding 131,149 ========== Net Asset Value, offering and redemption price per share $ 23.74 ========== (Net Assets/Shares outstanding)
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Statement of Operations For the Year Ended September 30, 2007 --------------------------------------------------------------------------------
Investment Income (Note 1B) Dividend income (net of foreign withholding taxes $125) $ 63,762 Dividend income from affiliated investments (Note 1 F) 5,475 Securities lending income (Note 6) 271 ---------- Total investment income 69,508 Expenses Investment advisory fee (Note 2) $ 31,362 Accounting, custody, administration and transfer agent fees (Note 2) 50,654 Professional fees 36,208 Registration fees 21,185 Trustees' fees and expenses (Note 2) 2,999 Insurance expense 1,045 Miscellaneous expenses 18,279 --------- Total expenses 161,732 Deduct: Waiver of investment advisory fee (Note 2) (31,362) Reimbursement of Fund operating expenses (Note 2) (84,532) --------- Total expense deduction (115,894) --------- Net Expenses 45,838 ---------- Net investment income 23,670 ---------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 406,171 Change in unrealized appreciation (depreciation) on: Investments 299,538 ---------- Net realized and unrealized gain (loss) on investments 705,709 ---------- Net Increase in Net Assets from Operations $ 729,379 ==========
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Statements of Changes in Net Assets --------------------------------------------------------------------------------
For the period December 21, 2005 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 -------------------- -------------------- Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 23,670 $ 9,098 Net realized gain (loss) 406,171 (60,121) Change in net unrealized appreciation (depreciation) 299,538 96,593 ----------- ----------- Net increase (decrease) in net assets from investment operations 729,379 45,570 ----------- ----------- Distributions to Shareholders (Note 1C) From net investment income (20,067) (5,000) ----------- ----------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 3,129,260 2,500,000 Dividend reinvestment 20,067 5,000 Cost of shares redeemed (3,290,807) -- ----------- ----------- Net increase (decrease) in net assets from Fund share transactions (141,480) 2,505,000 ----------- ----------- Total Increase (Decrease) in Net Assets 567,832 2,545,570 Net Assets At beginning of year 2,545,570 -- ----------- ----------- At end of year (including undistributed net investment income of $7,836 and $4,098, respectively) $ 3,113,402 $ 2,545,570 =========== ===========
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Financial Highlights --------------------------------------------------------------------------------
For the period December 21, 2005 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 -------------------- -------------------- Net Asset Value, Beginning of Year $ 20.32 $20.00 ------- ------ From Operations: Net investment income* (a) 0.11 0.07 Net realized and unrealized gains (loss) on investments 3.44 0.29 ------- ------ Total from operations 3.55 0.36 ------- ------ Less Distributions to Shareholders: From net investment income (0.13) (0.04) ------- ------ Total distributions to shareholders (0.13) (0.04) ------- ------ Net Asset Value, End of Year $ 23.74 $20.32 ======= ====== Total Return (b) 17.49% 1.81%(c) Ratios/Supplemental data: Expenses (to average daily net assets)* 0.95% 0.95%(d) Net Investment Income (to average daily net assets)* 0.49% 0.47%(d) Portfolio Turnover 109% 23%(c) Net Assets, End of Year (000's omitted) $ 3,113 $2,546 -------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios without waivers and reimbursement would have been: Net investment income (loss) per share (a) $ (0.42) $(0.87) Ratios (to average daily net assets): Expenses 3.35% 7.06%(d) Net investment income (loss) (1.91%) (5.64%)(d)
(a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) Not annualized. Returns for periods of less than one year have not been annualized. (d) Calculated on an annualized basis. The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Mellon Equity Large Cap Growth Fund (the "Fund"), which commenced operation on December 21, 2005, is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of large capitalization companies that have total market capitalizations within the range of capitalizations of the companies in the top 80% of the Russell 1000 Growth Index at the time of purchase. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 14 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by Mellon Equity Associates, LLP ("Mellon Equity"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to Mellon Equity for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 0.65% of the Fund's average daily net assets. Mellon Equity voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.95% of the Fund's average daily net assets for the year ended September 30, 2007. Pursuant to this agreement, for the year ended September 30, 2007, Mellon Equity voluntarily waived a portion of its investment advisory fee in the amount of $31,362 and reimbursed $84,532 of the Fund's operating expenses. This arrangement is voluntary and temporary and may be discontinued or revised by Mellon Equity at any time. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of Mellon Equity, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $6,119, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of Mellon Equity, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $44,535 for the year ended September 30, 2007. The Trust also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, Mellon Bank earned $112 for the year ended September 30, 2007. See Note 6 for further details. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $72 for the year ended September 30, 2007, which is included in miscellaneous expenses on the statement of operations. See Note 7 for further details. 15 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,250, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of Mellon Equity or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of Mellon Equity or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was not charged an administrative service fee by an affiliate of BNY Mellon. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of Mellon Equity, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $1,171, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of Mellon Equity, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ============= ============= Non-U.S. Government Securities $ 5,084,361 $ 5,332,002 ============= =============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the period December 21, 2005 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 -------------------- -------------------- Shares sold 149,038 125,000 Shares issued to shareholders in reinvestment of distributions 888 262 Shares redeemed (144,039) (--) -------- ------- Net increase (decrease) 5,887 125,262 ======== =======
At September 30, 2007, one shareholder of record (MBC Investments Corp., a wholly-owned subsidiary of BNY Mellon and an affiliate of Mellon Equity) held in the aggregate 96% of the total outstanding shares of the Fund. Investment activities of this shareholder could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund did not assess any redemption fees. 16 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact on the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $2,819,264 ========== Gross unrealized appreciation $ 442,041 Gross unrealized depreciation (53,097) ---------- Net unrealized appreciation (depreciation) $ 388,944 ========== Undistributed ordinary income $ 175,598 Undistributed capital gains 185,475 ---------- Total distributable earnings $ 361,073 ==========
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006 was as follows:
2007 2006 --------- ------- Ordinary income $ 20,067 $ 5,000 ========= =======
(6) Security Lending: The Fund may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $3,252 of which $2,981 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $130,819 on loan. See Schedule of Investments for further detail on the security positions on loan and collateral held, of which $43,900 was collateralized with cash and $90,600 was collateralized with liquid securities. (7) Line of Credit: On behalf of the Fund, and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund had average borrowings outstanding of $42,750 for a total of eight days and incurred $55 of interest expense. At September 30, 2007, the Fund did not have a loan balance outstanding. 17 Mellon Institutional Funds Investment Trust Mellon Equity Large Cap Growth Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of Mellon Equity Large Cap Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Mellon Equity Large Cap Growth Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period from December 21, 2005 (commencement of operations) through September 30, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 18 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $512 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $512 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $512 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $515 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* * Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 19 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 20 THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com MELLON INSTITUTIONAL FUNDS Annual Report Mellon Equity Micro Cap Fund ------------------------------------------------------------------------------- Year ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Management Discussion and Analysis ------------------------------------------------------------------------------- Over the past year, equity markets have faced many negative crosscurrents, such as rising energy prices and turmoil in the credit markets. In spite of these negative influences, equity markets posted positive returns over the past year, though not without a noticeable market decline in mid to late summer. At the very moment it appeared that the equity markets were set for a meaningful decline, the U.S. Federal Reserve changed course and cut key interest rates. Upon this news, markets rallied in September, and thus provided attractive total returns for the year under review. Within the context of such a turbulent market, it is not surprising that generally speaking, larger capitalization stocks outperformed smaller capitalization issues, as investors searched for stability. While micro cap stocks provided a positive absolute return over the past year, it is also not surprising that this slice of the equity marketplace was also the weakest performing sector, when compared to other equity capitalization classifications. For the one-year period ended September 30, 2007, the Fund provided a total return of 8.85% as compared to 9.51% for the Dow Jones Wilshire Micro Cap Index, the Fund's benchmark. While we were pleased that the Fund achieved a positive absolute return, we were nonetheless disappointed that the return was modestly below that of the benchmark. Our goal remains to generate investment returns that exceed our performance benchmark. We manage the Fund using a quantitative valuation model along with a sector neutral approach to stock selection based on the performance benchmark. Thus individual stock selection within each economic sector is the primary engine that drives investment performance. Our stock selections within the health care and energy sectors were especially rewarding. Within the health care sector, we experienced beneficial stock selection among bio-technology and pharmaceutical companies. Among our bio-technology holdings, we achieved positive results both through owning a company that was subject to a very attractive takeover offer, to owning issues that had very positive new product announcements over the past year. Among our pharmaceutical holdings, companies with products serving such diverse markets as cardiovascular health to veterinarian/animal health also had a positive impact upon relative performance. Within the energy related sector, some of our investments among oil exploration companies contributed positively to performance. As for negative influences, we had disappointing stock selections among financial services companies, especially among banks and thrift institutions. This group appeared to be under pressure as smaller and more consumer oriented financial institutions faced an environment of generally rising interest rates, and growing consumer anxiety about their personal economic condition. Such a mix caused many investors to become concerned about the future business trends for these smaller financial organizations. We also had some disappointing results among industrial services and freight companies. These types of firms tend to be more economically sensitive, and appeared to be under pressure again based upon an uncertain interest rate and economic outlook. In closing, we have just been through a fairly uncertain economic environment, with issues such as rising energy prices and the subprime credit market worries causing a high level of investor anxiety. In spite of these negatives, the microcap sector of the equity market generated competitive returns over the past year. Thus, we remain convinced that this capitalization sector continues to provide attractive and very dynamic investment opportunities, and should be a portion of a well-diversified equity portfolio. John R. O'Toole, CFA Peter D. Goslin, CFA Portfolio Manager Portfolio Manager Mellon Equity Associates, LLP Mellon Equity Associates, LLP 2 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Comparison of Change in Value of $100,000 Investment in Mellon Equity Micro Cap Fund and the Dow Jones Wilshire Micro Cap Index (Unaudited) ------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
Mellon Equity Dow Jones Wilshire PERIOD Micro Cap Fund Micro Cap Index * 4/28/06 100,000 100,000 6/30/06 94,050 93,600 9/30/06 93,200 92,037 12/31/06 102,150 100,891 3/31/07 102,550 102,495 6/30/07 107,100 105,857 9/30/07 101,450 100,779
Average Annual Total Returns (for period ended 9/30/2007) ------------------------------------------------------------------------------- Since Inception 1 Year 4/28/2006 ------------------------------------------------------------------------------- Fund 8.85% 1.02%
* Source: Wilshire Associates Incorporated Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 3 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Shareholder Expense Example (Unaudited) ------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 --------------------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $ 989.27 $6.73 Hypothetical (5% return per year before expenses) $1,000.00 $1,018.30 $6.83
------------ + Expenses are equal to the Fund's annualized expense ratio of 1.35%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 4 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments -------------------------------------------------------------------------------------------------------- EMS Technologies, Inc. Technology 0.9% Omrix Biohparmaceuticals, Inc. Health Care 0.9 Ducommun, Inc. Industrials 0.8 Enzon Pharmaceuticals, Inc. Health Care 0.8 Albany Molecular Research, Inc. Health Care 0.8 Digi International, Inc. Technology 0.8 Ambassadors Group, Inc. Information 0.8 Monarch Casino & Resort, Inc. Consumer Cyclicals 0.8 Landauer, Inc. Technology 0.8 Vital Signs, Inc. Health Care 0.8 ----- 8.2%
* Excludes short-term securities and investment of cash collateral.
Percentage of Economic Sector Allocation Net Assets ----------------------------------------------------------- Consumer Cyclicals 5.8% Consumer Hard Goods 4.1 Consumer Staples 3.3 Financials 17.2 Health Care 20.9 Industrials 11.4 Information 7.9 Materials 4.6 Oil and Gas Producer 3.7 Technology 17.7 Telecommunications 2.0 Utilities 1.7 Short-term and Other Net Assets (0.3) ------- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--116.1% EQUITIES--100.3% Consumer Cyclicals--5.8% AFC Enterprises, Inc. 2,100 (a) 31,605 Buffalo Wild Wings, Inc. 1,450 (a) 54,694 Cato Corp., Class A 1,650 33,726 Fred's, Inc., Class A 3,400 35,802 FTD Group, Inc. 3,400 50,592 G-III Apparel Group Ltd. 1,700 (a) 33,473 Hibbett Sports, Inc. 1,400 (a) 34,720 Jos A Bank Clothiers, Inc. 1,100 (a) 36,762 Kenneth Cole Productions, Inc., Class A 2,100 40,677 Maidenform Brands, Inc. 2,500 (a) 39,700 Monarch Casino & Resort, Inc. 2,600 (a) 73,970 Republic Airways Holding, Inc. 1,500 (a) 31,755 The Bon-Ton Stores, Inc. 1,700 (b) 38,624 West Marine, Inc. 2,000 (a) 23,100 559,200 Consumer Hard Goods--4.1% Accuride Corp. 2,400 (a) 29,064 Aftermarket Technology Corp. 1,750 (a) 55,545 Arctic Cat, Inc. 2,600 42,536 Asbury Automotive Group, Inc. 2,000 39,620 Churchill Downs, Inc. 1,000 49,960 Kimball International, Inc., Class B 1,800 20,484 Movado Group, Inc. 1,200 38,304 Premier Exhibitions, Inc. 2,800 (a,b) 42,224 Steinway Musical Instruments, Inc. 1,700 (b) 50,354 Town Sports International Holdings, Inc. 1,800 (a) 27,378 395,469 Consumer Staples--3.3% Coca-Cola Bottling Co. 600 36,180 Core-Mark Holding Co., Inc. 1,500 (a) 52,845 Imperial Sugar Co. 1,800 (b) 47,034 J & J Snack Food Corp. 1,400 48,748 Lifetime Brands, Inc. 1,800 36,522 Physicians Formula Holdings, Inc. 3,750 (a) 43,988 Spartan Stores, Inc. 2,250 50,693 316,010 Financials--17.2% American Physicians Capital, Inc. 800 31,168 Ameris Bancorp 2,100 (b) 37,968 Amerisafe, Inc. 2,650 (a) 43,831
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------------- Financials (continued) Anchor Bancorp Wisconsin, Inc. 2,400 64,800 ASTA Funding, Inc. 1,300 (b) 49,816 BancFirst Corp. 1,100 (b) 49,357 Bank of the Ozarks, Inc. 1,400 42,742 Banner Corp. 1,750 (b) 60,182 City Bank Lynnwood WA 1,800 (b) 51,696 EMC Insurance Group, Inc. 2,000 51,980 First Cash Financial Services, Inc. 1,400 (a) 32,788 First Financial Corp. 1,500 (b) 45,450 First Merchants Corp. 2,100 45,276 First Place Financial Corp. 2,000 35,400 Great Southern Bancorp, Inc. 1,400 34,776 Greene Bankshares, Inc. 1,350 49,207 Hallmark Financial Services, Inc. 3,300 (a) 46,365 Hersha Hospitality Trust REIT 3,100 30,690 Horizon Financial Corp. 2,300 46,644 Imperial Capital Bancorp, Inc. 1,100 31,075 Intervest Bancshares Corp. 2,000 49,500 Lakeland Financial Corp. 2,000 46,220 MarketAxess Holdings, Inc. 2,500 (a) 37,500 Nara Bancorp, Inc. 2,500 (b) 39,050 National Penn Bancshares, Inc. 2,575 (b) 42,127 NYMAGIC, Inc. 1,100 30,591 Portfolio Recovery Associates, Inc. 850 45,110 Preferred Bank, Los Angeles 1,350 53,109 Republic Bancorp, Inc., Class A 2,000 (b) 31,680 Safety Insurance Group, Inc. 800 28,752 Sierra Bancorp 1,600 (b) 45,856 Simmons First National Corp., Class A 2,000 (b) 52,680 Southside Bancshares, Inc. 2,300 (b) 50,807 Sun Bancorp, Inc. 2,700 (a) 47,250 Taylor Capital Group, Inc. 2,000 55,860 Union Bankshares Corp. 1,250 (b) 28,388 Vineyard National Bancorp Co. 3,000 50,160 West Coast Bancorp 1,750 49,718 1,665,569 Health Care--20.9% Albany Molecular Research, Inc. 5,000 (a) 75,500 Alliance Imaging, Inc. 6,000 (a) 54,360 Amsurg Corp. 1,800 (a) 41,526 Bentley Pharmaceuticals, Inc. 4,000 (a) 49,920 Cambrex Corp. 5,800 63,162
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------------------------------------------------------- Health Care (continued) CryoLife, Inc. 5,000 (a) 47,250 Cutera, Inc. 1,600 (a) 41,936 Datascope Corp. 1,700 57,477 Emergent Biosolutions, Inc. 7,000 (a) 62,160 Enzon Pharmaceuticals, Inc. 9,100 (a,b) 80,171 Gentiva Health Services, Inc. 3,400 (a) 65,314 Greatbatch, Inc. 2,000 (a,b) 53,180 Hanger Orthopedic Group, Inc. 2,700 (a) 30,591 LifeCell Corp. 1,500 (a,b) 56,355 Martek Biosciences Corp. 1,800 (a) 52,254 Matria Healthcare, Inc. 2,200 (a,b 57,552 Medicines Co. 2,800 (a) 49,868 Medivation, Inc. 2,600 (a,b) 52,130 Merit Medical Systems, Inc. 4,300 (a) 55,814 Natus Medical, Inc. 3,750 (a) 59,775 Neurocrine Biosciences, Inc. 3,700 (a) 37,000 Northstar Neuroscience, Inc. 2,500 (a) 27,900 Noven Pharmaceuticals, Inc. 3,050 (a) 48,587 Omrix Biohparmaceuticals, Inc. 2,350 (a) 82,979 OSI Systems, Inc. 1,400 (a) 31,514 Pain Therapeutics, Inc. 7,300 (a,b) 68,255 Palomar Medical Technologies, Inc. 1,250 (a) 35,613 Par Pharmaceutical Cos., Inc. 1,500 (a) 27,840 Pozen, Inc. 3,000 (a,b) 33,180 Radiation Therapy Services, Inc. 1,850 (a,b) 38,517 Regeneration Technologies, Inc. 3,750 (a) 40,200 Salix Pharmaceuticals Ltd. 4,000 (a) 50,448 Sciele Pharma, Inc. 2,400 (a,b) 62,448 SuperGen, Inc. 7,500 (a) 32,550 Synovis Life Technologies, Inc. 3,000 (a) 64,710 Synta Pharmaceuticals Corp. 4,500 (a,b) 29,700 Trubion Pharmaceuticals, Inc. 3,000 (a,b) 36,390 U.S. Physical Therapy, Inc. 3,300 (a) 48,840 Viropharma, Inc. 5,600 (a) 49,840 Vital Signs, Inc. 1,400 72,996 2,025,802 Industrials--11.4% AAON, Inc. 2,850 56,230 Apogee Enterprises, Inc. 2,250 58,365 Arkansas Best Corp. 2,100 68,586 Builders FirstSource, Inc. 3,000 (a) 32,340 CDI Corp. 1,700 47,396 Columbus McKinnon Corp. 2,000 (a) 49,780
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ---------------------------------------------------------------------------------------------------------------------------- Industrials (continued) Comfort Systems USA, Inc. 4,700 66,740 Ducommun, Inc. 2,500 (a) 80,750 Electro Rent Corp. 2,800 39,228 Encore Wire Corp. 1,750 43,977 Hardinge, Inc. 1,250 43,537 Heico Corp. 1,400 69,104 Heidrick & Struggles International, Inc. 1,000 36,450 Kadant, Inc. 1,750 (a) 49,000 NN, Inc. 5,000 49,050 Powell Industries, Inc. 1,100 (a) 41,679 Saia, Inc. 2,300 (a) 38,019 Standard Parking Corp. 1,100 (a) 43,769 T-3 Energy Services, Inc. 1,100 (a) 46,904 TriMas Corp. 3,000 (a) 39,810 U.S. Concrete, Inc. 5,000 (a) 32,950 Volt Information Sciences, Inc. 1,350 (a) 23,814 Waste Industries USA, Inc. 1,800 51,516 1,108,994 Information--7.9% Ambassadors Group, Inc. 1,950 74,295 Authorize.Net Holdings, Inc. 2,000 (a) 35,260 Blue Coat Systems, Inc. 500 (a,b) 39,380 Bowne & Co., Inc. 1,600 26,656 Chordiant Software, Inc. 3,500 (a) 48,510 COMSYS IT Partners, Inc. 2,750 (a) 46,227 Ennis, Inc. 2,100 46,284 iBasis, Inc. 5,300 56,975 Interwoven, Inc. 3,750 (a) 53,362 Kendle International, Inc. 1,600 (a) 66,448 MTC Technologies, Inc. 1,500 (a,b) 28,965 Online Resources Corp. 3,500 (a) 44,355 SI International, Inc. 1,900 (a) 54,283 SonicWALL, Inc. 4,900 (a) 42,777 Stanley, Inc. 2,200 (a) 60,610 Sykes Enterprises, Inc. 2,650 (a) 44,017 768,404 Materials--4.6% Aceto Corp. 6,000 54,000 Calgon Carbon Corp. 2,100 (a,b) 29,316 Koppers Holdings, Inc. 1,800 69,498 Lydall, Inc. 5,000 (a) 46,400 Ryerson, Inc. 1,600 53,984 Schulman A, Inc. 2,150 42,420
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------------------------------------- Materials (continued) Schweitzer-Mauduit International, Inc. 2,100 48,930 Superior Essex, Inc. 1,700 (a) 63,376 Tredegar Corp. 2,000 34,500 442,424 Oil And Gas Producer--3.7% Callon Petroleum Co. 3,700 (a) 51,504 Dawson Geophysical Co. 900 (a) 69,759 Gulfport Energy Corp. 1,750 (a) 41,405 NATCO Group Inc., Class A 600 (a) 31,050 Stone Energy Corp. 1,800 (a) 72,018 Union Drilling, Inc. 2,500 (a) 36,450 Warren Resources, Inc. 4,600 (a) 57,684 359,870 Technology--17.7% Actel Corp. 1,700 (a) 18,241 Advanced Energy Industries, Inc. 2,200 (a) 33,220 AMIS Holdings, Inc. 3,600 (a) 34,956 Ansoft Corp. 1,900 (a) 62,662 Bel Fuse, Inc., Class B 1,400 48,524 Cirrus Logic, Inc. 7,200 (a) 46,080 Cohu, Inc. 1,900 35,625 Commvault Systems, Inc. 1,400 (a) 25,928 Computer Programs & Systems, Inc. 1,650 43,494 CPI International, Inc. 2,200 (a) 41,822 CTS Corp. 4,350 56,115 Digi International, Inc. 5,300 (a) 75,472 Ditech Networks, Inc. 6,500 (a) 34,255 DivX, Inc. 2,750 (a) 40,892 Double-Take Software, Inc. 3,050 (a) 58,285 EMS Technologies, Inc. 3,500 (a) 85,855 Epicor Software Corp. 4,200 (a) 57,834 Exar Corp. 3,000 (a) 39,180 i2 Technologies, Inc. 1,800 (a,b) 27,450 Interactive Intelligence, Inc. 2,450 (a) 46,550 Ixia 3,600 (a) 31,392 Landauer, Inc. 1,450 73,892 LoJack Corp. 1,600 (a) 30,336 Manhattan Associates, Inc. 2,200 (a) 60,302 Mattson Technology, Inc. 3,250 (a) 28,112 Methode Electronics, Inc. 4,000 60,200 MIPS Technologies, Inc. 6,000 (a) 47,400 MTS Systems Corp. 1,000 41,600 Park Electrochemical Corp. 2,100 70,518
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------------------------------------- Technology (continued) Radyne Corp. 3,000 (a) 31,620 Rimage Corp. 1,750 (a) 39,270 Rudolph Technologies, Inc. 3,800 (a) 52,554 Sonic Solutions, Inc. 4,800 (a) 50,256 Super Micro Computer, Inc. 5,000 (a) 48,800 Supertex, Inc. 850 (a) 33,898 Techwell, Inc. 3,850 (a) 40,887 Vignette Corp. 2,950 (a) 59,207 1,712,684 Telecommunications--2.0% Atlantic Tele-Network, Inc. 2,000 72,700 FairPoint Communications, Inc. 1,700 32,062 Oplink Communications, Inc. 2,900 (a) 39,614 Shenandoah Telecommunications Co. 2,250 (b) 48,960 193,336 Utilities--1.7% Central Vermont Public Service Corp. 1,450 52,983 CH Energy Group, Inc. 500 23,900 Energysouth, Inc. 600 30,252 Laclede Group, Inc. 1,050 33,894 Otter Tail Corp. 800 28,520 169,549 Total Equities (Cost $9,923,668) 9,717,311 INVESTMENT OF CASH COLLATERAL--15.8% BlackRock Cash Strategies L.L.C. (Cost $1,525,413) 1,525,413 1,525,413 TOTAL UNAFFILIATED INVESTMENTS (Cost $11,449,081) 11,242,724 AFFILIATED INVESTMENTS--1.2% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $112,677) 112,677 (c) 112,677 ----------- TOTAL INVESTMENTS--117.3% (Cost $11,561,758) 11,355,401 LIABILITIES IN EXCESS OF OTHER ASSETS--(17.3%) (1,672,308) ----------- NET ASSETS--100% 9,683,093 ===========
Notes to Schedule of Investments: REIT--Real Estate Investment Trust (a) Non-income producing security. (b) Security, or a portion of thereof, was on loan at September 30, 2007. (c) Affiliated institutional money market fund. The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Statement of Assets and Liabilities September 30, 2007 --------------------------------------------------------------------------------
Assets Investment in securities, at value (Note 1A) (including securities on loan, valued at $1,421,255 (Note 6)): Unaffiliated investments (cost $11,449,081) $11,242,724 Affiliated investments (Note 1F) (cost $112,677) 112,677 Receivable for investments sold 281,995 Interest and dividends receivable 10,334 Prepaid expenses 6,525 ----------- Total assets 11,654,255 Liabilities Collateral for securities on loan (Note 6) $ 1,525,413 Payable for investments purchased 391,929 Accrued professional fees 33,370 Accrued accounting, custody, administration and transfer agent fees (Note 2) 16,958 Accrued shareholder reporting fee (Note 2) 1,203 Accrued trustees' fees (Note 2) 1,036 Accrued administrative services expense (Note 2) 8 Accrued chief compliance officer fee (Note 2) 367 Other accrued expenses and liabilities 878 ----------- Total liabilities 1,971,162 ----------- Net Assets $ 9,683,093 =========== Net Assets consist of: Paid-in capital $ 9,303,211 Accumulated net realized gain 579,319 Undistributed net investment income 6,920 Net unrealized depreciation (206,357) ----------- Total Net Assets $ 9,683,093 =========== Shares of beneficial interest outstanding 477,196 =========== Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 20.29 ===========
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Statement of Operations For the Year Ended September 30, 2007 --------------------------------------------------------------------------------
Investment Income (Note 1B) Dividend income from unaffiliated investments $ 119,999 Dividend income from affiliated investments (Note 1 F) 1,807 Securities lending income (Note 6) 16,274 ---------- Total investment income 138,080 Expenses Investment advisory fee (Note 2) $ 97,153 Accounting, custody, administration and transfer agent fees (Note 2) 58,648 Registration fees 19,874 Professional fees 28,608 Trustees' fees and expenses (Note 2) 3,142 Insurance expense 108 Administrative service fees (Note 2) 16 Miscellaneous expenses 19,606 ---------- Total expenses 227,155 Deduct: Waiver of investment advisory fee (Note 2) (95,995) ---------- Net Expenses 131,160 ---------- Net investment income 6,920 ---------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 998,137 Change in unrealized appreciation (depreciation) on: Investments (224,942) ---------- Net realized and unrealized gain (loss) on investments 773,195 ---------- Net Increase in Net Assets from Operations $ 780,115 ==========
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Statements of Changes in Net Assets --------------------------------------------------------------------------------
For the period May 1, 2006 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 -------------------- --------------------- Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 6,920 $ (6,221) Net realized gain (loss) 998,137 (418,818) Change in net unrealized appreciation (depreciation) (224,942) 18,585 ----------- ----------- Net increase (decrease) in net assets from investment operations 780,115 (406,454) ----------- ----------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 82,502 9,226,930 ----------- ----------- Total Increase (Decrease) in Net Assets 862,617 8,820,476 Net Assets At beginning of year 8,820,476 -- ----------- ----------- At end of year (including undistributed net investment income of $6,920 and $0, respectively) $ 9,683,093 $ 8,820,476 =========== ===========
The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Financial Highlights --------------------------------------------------------------------------------
For the period May 1, 2006 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------- --------------------- Net Asset Value, Beginning of Year $ 18.64 $ 20.00 ------- ------- From Operations: Net investment income (loss)* (a) 0.01 (0.01) Net realized and unrealized gains (loss) on investments 1.64 (1.35) ------- ------- Total from operations 1.65 (1.36) ------- ------- Net Asset Value, End of Year $ 20.29 $ 18.64 ======= ======= Total Return (b) 8.85% (6.80%)(c) Ratios/Supplemental data: Expenses (to average daily net assets)* 1.35% 1.35%(d) Net Investment Income (Loss) (to average daily net assets)* 0.07% (0.18%)(d) Portfolio Turnover 167% 103%(c) Net Assets, End of Year (000's omitted) $ 9,683 $ 8,820 ------------- * The periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios without waiver and reimbursement would have been: Net investment income (loss) per share (a) $ (0.19) $ (0.19) Ratios (to average daily net assets): Expenses 2.34% 3.72%(d) Net investment income (loss) (0.92%) (2.55%)(d)
(a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) Not annualized. Returns for periods of less than one year have not been annualized. (d) Calculated on an annualized basis. The accompanying notes are an integral part of the financial statements. 15 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Notes to Financial Statements ------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Mellon Equity Micro Cap Fund (the "Fund"), which commenced operations on May 1, 2006, is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of micro cap U.S. companies with total market capitalizations equal to or less than $1 billion at the time of investment. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services.Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 16 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Notes to Financial Statements ------------------------------------------------------------------------------- D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by Mellon Equity Associates, LLP ("Mellon Equity"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to Mellon Equity for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 1.00% of the Fund's average daily net assets. Mellon Equity voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 1.35% of the Fund's average daily net assets for the year ended September 30, 2007. Pursuant to this arrangement, for the year ended September 30, 2007, Mellon Equity voluntarily waived a portion of its investment advisory fee in the amount of $95,995. This arrangement is voluntary and temporary and may be discontinued or revised by Mellon Equity at any time. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of Mellon Equity, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $8,331, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of Mellon Equity, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $50,317 for the year ended September 30, 2007. The Trust also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, Mellon Bank earned $5,659 for the year ended September 30, 2007. See Note 6 for further details. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $71 for the year ended September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. See Note 7 for further details. 17 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,250, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of Mellon Equity or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of Mellon Equity or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of Mellon Equity, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $1,241, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was not charged an administrative service fee by any BNY Mellon affiliates. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of Mellon Equity, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ============ ============ Non-U.S. Government Securities $ 16,254,369 $ 16,132,917 ============ ============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractionafl shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the period May 1, 2006 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------- -------------------- Shares sold 4,090 473,106 -------- -------- Net increase (decrease) 4,090 473,106 ======== ========
At September 30, 2007, two shareholders of record (including MBC Investments Corp., a wholly-owned subsidiary of BNY Mellon and an affiliate of Mellon Equity which holds approximately 52%) held in the aggregate 98.8% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund did not assess any redemption fees. 18 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Notes to Financial Statements ------------------------------------------------------------------------------- (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $ 11,561,758 ============= Gross unrealized appreciation $ 686,993 Gross unrealized depreciation (893,350) ------------- Net unrealized appreciation (depreciation) $ (206,357) ============= Undistributed ordinary income $ 437,491 Undistributed capital gains 148,748 ------------- Total distributable earnings $ 586,239 =============
(6) Security Lending: The Fund may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $2,579,964 of which $2,563,690 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $1,421,255 on loan of which $1,525,413 was collateralized with cash and $35,750 was collateralized with highly liquid securities. See Schedule of Investments for further detail on the security positions on loan and collateral held. (7) Line of Credit: On behalf of the Fund and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund had average borrowings outstanding of $1,000 for a total of one days and incurred $0 of interest expense. At September 30, 2007, the Fund did not have a loan balance outstanding. 19 Mellon Institutional Funds Investment Trust Mellon Equity Micro Cap Fund Report of Independent Registered Public Accounting Firm ------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of Mellon Equity Micro Cap Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Mellon Equity Micro Cap Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, and the change in its net assets and the financial highlights for the year then ended and for the period from May 1, 2006 (commencement of operations) through September 30, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 20 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ----------------------------------------------------------------------------------------------------------------------------------- Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $528 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $528 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $528 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $536 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* *Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 21 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ----------------------------------------------------------------------------------------------------------------------------------- Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 22 THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6915AR0907 MELLON INSTITUTIONAL FUNDS Annual Report Newton International Equity Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust Newton International Equity Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Newton's investment philosophy is structured around the central tenet of our business: no company, market or economy can be considered in isolation; each must be understood in a global context. We believe that, in a rapidly shrinking world, we can properly evaluate the prospects for equities only by understanding events, trends and competitive pressures globally. We also believe that a geographically constrained perspective to stock selection limits a portfolio manager's ability to identify and invest in the strongest companies and does not provide for sufficient exposure to deep, long-term trends in economies. The roots of the current equity market turmoil have been a concern of Newton for some time. The very low level of interest rates for much of this decade and problems of the post dot.com bubble have engendered a rapid acceleration in consumer lending in the US and UK against a backdrop of soaring house prices and a boom in Merger & Acquisition (M&A) activity, fed by debt and exemplified by the prominence of private equity. With banks and insurers from Germany to Singapore admitting exposure to potentially worthless US mortgage-backed securities, markets are understandably nervous. As banks tighten lending requirements we may see a more significant slow-down in the US and this could have a negative impact on the rest of the world. However, competing trends such as the urbanization and industrialization of Asia may provide some offset. Although global equity markets began the period with solid gains (on the back of better data than expected from the US), they went through several changes of fortune during the twelve months to September 30, 2007. Some of the factors influencing these swings were: o aggressive rhetoric in China from the government, prompting fears that the authorities intended to curtail recent dramatic share price appreciation and introduce a sharper capital gains tax regime; o the acute deterioration in the US sub-prime mortgage market, followed by the collapse of a number of sub-prime finance providers; o the ever-growing pipeline of M&A transactions, ensuring strong performance from Continental Europe; o the yen's devaluation against a broad range of currencies, which proved to be a key determinant of performance in Japan; o a sharp sell-off in Thailand following its Central Bank's bungled attempt to instigate exchange controls in order to curb the baht's appreciation; o a rise in the Brazilian credit rating to one level below investment grade; o a significant volatility in equity markets in the three months to September 2007, as one of the consequences of the US sub-prime mortgage crisis. 2 Mellon Institutional Funds Investment Trust Newton International Equity Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Many of these events played particularly to our key long-term themes(1) of 'Global Realignment,' 'Debt & Credit' and 'Developing Economies.' For the twelve months to September 30, 2007, the Fund produced a return of 26.9% as compared to a return of 24.9% for its benchmark, the MSCI EAFE Index. Over the period outperformance relative to the benchmark was achieved primarily in the Industrials, Energy and Financials sectors, while poor relative performance was seen in the Healthcare and Information Technology sectors. In sector terms, Industrials was the top performer for the Fund: our 'Energy Supply' theme was a primary driver for activity in this sector during 2007. We remain positive on Telecoms, where we continue to see major opportunities for expansion and distribution in the developing world. The sector made a good contribution to the overall performance of the Fund during the year. The two worst-performing areas over the period were Healthcare and Information Technology. During the months leading up to September 2007 we saw continuing credit fears and concerns over a slowing US economy leading indices down before interest rate cuts helped them rebound strongly. Prior to these rate cuts, we had seen a concentrated period of heavy selling across asset classes in mid-August. This became indiscriminate in some cases, in our view, and we therefore added to some positions that we expect to be key beneficiaries of our 'Global Realignment' theme. All of these stocks were sold down in the markets as investors reduced their exposure to perceived 'risky' areas. We view this as ironic: the US dollar appreciated at this time as monies were repatriated to the economy most exposed to the catalyst of the market's concerns - the US itself. We continue to believe that the well-documented sub-prime and credit issues will take some time to play out. There is little clarity as to where the worst of the debt sits as much is wrapped up in larger vehicles, and neither the investment banks nor underlying investors can know with confidence to what extent they are exposed. This major 'Debt and Credit' event reinforces our caution on bank stocks: Australian and UK domestic banking exposure remains zero. This said, we contend that the rest of the world will be better insulated from US economic weakness as decoupling continues. Our macroeconomic outlook for Asia ex-Japan, Continental Europe and the developing markets remains constructive. 3 Mellon Institutional Funds Investment Trust Newton International Equity Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Over the next few months we expect the market to begin to differentiate more rationally between the likely winners and losers, providing further opportunity to increase favoured holdings. We do not see the recent turmoil greatly changing our key themes of 'Debt & Credit', 'Energy Supply' and 'Global Realignment' and so continue to represent these views within the Fund. Paul Butler, Director of Investment Paul Markham, Director of Investment Management (Global Equities) Management (Global Equities / EAFE) Newton Investment Management Limited Newton Investment Management Limited 1 Rather than being unduly influenced by index benchmarks or fleeting market trends, one strand of Newton's investment philosophy focuses on interpreting the key forces, 'Themes', that drive change over the long term. Newton's analysts interpret these themes to highlight areas of investment opportunity. The themes referenced in this report include: o Global Realignment - The western industrialised nations dominate the world's GDP, wealth, consumption and market capitalisation in US dollar terms, as well as consuming the lion's share of natural resources. The stronger growth and increasing economic influence of the developing world will progressively challenge this position. Some realignment over time is inevitable; how it occurs will be crucially important to the longer term global economic outlook. o Debt & Credit - The era of disinflation has fostered a supercycle of credit growth in many of the developed economies. In recent years the pace of credit expansion has accelerated in response to global financial deregulation, relatively loose monetary policy and innovations in structured finance. The resulting high level of corporate and individual leverage in these economies is in stark contrast to that prevailing in the developing world where savings rates remain high. o Energy Supply - Forecasts of strong developing world growth together with increases in per capita energy usage point to continued strong demand for petroleum products. When combined with uncertainties over supply, this implies a structurally high real oil price. This theme has broad implications across sectors and economies, particularly in the light of measures to tackle climate change. o Developing Economies - The developing economies are increasingly fully engaged in the world trading system. Their influence on the global economic cycle is growing and they are on an apparent convergence course with the industrialised world. This secular trend will however be subject to significant cyclical influences particularly from the larger economies, such as China, and frictions regarding trade policies. 4 Mellon Institutional Funds Investment Trust Newton International Equity Fund Comparison of Change in Value of $100,000 Investment in Newton International Equity Fund and the MSCI EAFE Index (Unaudited) -------------------------------------------------------------------------------- [THE FOLLOWING IS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Newton International PERIOD Equity Fund MSCI EAFE Index* 12/21/05 100,000 100,000 12/31/05 99,700 100,000 3/31/06 111,200 109,396 6/30/06 107,174 110,162 9/30/06 109,153 114,488 12/31/06 120,260 126,341 3/31/07 121,638 131,490 6/30/07 132,003 139,910 9/30/07 138,533 142,955
Average Annual Total Returns (for period ended 9/30/2007) ================================================================================
Since Inception 1 Year 12/21/2005 -------------------------------------------------------------------------------- Fund 26.92% 20.07%
* Source: Lipper Inc. Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 5 Mellon Institutional Funds Investment Trust Newton International Equity Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ------------------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,139.40 $6.17 Hypothetical (5% return per year before expenses) $1,000.00 $1,019.30 $5.82
---------- + Expenses are equal to the Fund's annualized expense ratio of 1.15%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 6 Mellon Institutional Funds Investment Trust Newton International Equity Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Country Sector Investments ----------------------------------------------------------------------------------------------------- Statoil ASA Norway Energy 2.7% Toyota Motor Corp. Japan Consumer Discretionary 2.2 BP PLC United Kingdom Energy 2.0 Total SA France Energy 1.9 Vodafone Group PLC United Kingdom Information Technology 1.8 Nestle SA Switzerland Consumer Staples 1.8 Nokia Oyj Finland Information Technology 1.7 Anglo American PLC United Kingdom Materials 1.7 Deutsche Boerse AG Germany Financials 1.7 E On AG Germany Utilities 1.7 ---- 19.2%
* Excludes short-term securities.
Percentage of Geographic Region Allocation* Investments --------------------------------------------------------- Europe ex U.K. 44.9% United Kingdom 18.8 Asia ex Japan 16.7 America ex U.S. 9.4 Japan 9.2 Middle East/Africa 1.0 ----- 100.0%
* Excludes short-term securities. The Fund is actively managed. Current holdings may be different than those presented above. 7 Mellon Institutional Funds Investment Trust Newton International Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------------ UNAFFILIATED INVESTMENTS--98.6% EQUITIES--97.5% Argentina--0.3% Pampa Holding SA--GDR 7,171 (a) 157,142 Australia--1.2% Telstra Corp. 233,652 593,000 Brazil--6.1% All America Latina Logistica 40,517 577,235 Companhia de Bebidas das Americas--ADR 7,398 541,016 Diagnosticos da America SA 13,339 305,807 Petroleo Brasileiro SA--ADR 11,487 743,209 Porto Seguro SA 9,600 369,963 Tele Norte Leste Participacoes SA--ADR 20,321 456,410 2,993,640 Canada--1.1% Oncolytics Biotech, Inc. 93,674 (a) 178,983 Teck Cominco Ltd. Class B 8,042 381,882 560,865 China--1.2% Jiangsu Expressway Co., Ltd. 468,000 602,208 Colombia--0.6% Suramericana de Inversiones SA 31,144 287,104 Denmark--1.1% A P Moller-Maersk AS, Class B 39 535,882 Finland--1.7% Nokia Oyj 22,182 843,297 France--8.4% Alstom 3,124 635,124 AXA SA 11,435 511,692 France Telecom SA 17,554 588,002 Thales SA 8,569 502,339 Total SA 11,614 944,340 Veolia Environnement 5,573 479,925 Vivendi SA 10,682 450,883 4,112,305 Germany--12.0% Allianz SE 2,117 494,637 Comdirect Bank AG 21,814 271,873 Deutsche Boerse AG 6,086 828,810 E On AG 4,449 822,599 Fresenius Medical Care AG & Co. KGaA 7,275 386,645 Gerry Weber International AG 10,024 323,907 K+S AG 3,899 714,790
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust Newton International Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------------ Germany (continued) Praktiker Bau--und Heimwerkermaerkte AG 12,416 464,762 SAP AG 6,948 406,717 Siemens AG 5,041 693,112 Symrise AG 18,035 (a) 478,353 5,886,205 Greece--0.7% Public Power Corp. 9,290 368,282 Hong Kong--4.0% Esprit Holdings Ltd. 34,000 540,315 Jardine Matheson Holdings Ltd. 12,000 343,200 SRE Group Ltd. 1,100,000 475,590 Swire Pacific Ltd. Class A 48,500 588,198 1,947,303 Indonesia--1.4% PT Astra International Tbk 172,500 363,307 PT Bank Central Asia Tbk 487,000 327,686 690,993 Italy--0.8% Unipol Gruppo Finanziario SA 120,899 379,284 Japan--9.1% Canon, Inc. 11,900 649,543 Japan Tobacco, Inc. 130 714,112 JFE Holdings, Inc. 7,600 538,557 Mitsubishi Corp. 24,000 760,512 Toyota Motor Corp. 18,000 1,062,418 Yamada Denki Co., Ltd. 7,280 720,585 4,445,727 Kazakhstan--0.5% Kazkommertsbank--GDR 19,142 (a) 262,437 Luxembourg--1.1% ArcelorMittal 7,106 560,870 Malaysia--1.5% AMMB Holdings Berhad 269,500 343,504 Bursa Malaysia Bhd 121,000 390,896 734,400 Netherlands--1.6% Koninklijke Philips Electronics NV 17,791 802,959 Norway--3.1% Aker Kvaerner ASA 6,900 219,674 Statoil ASA 38,253 1,302,943 1,522,617
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust Newton International Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------------ Russia--2.3% AFK Sistema--GDR 11,598 (a) 385,634 EVRAZ GROUP SA--GDR 7,430 470,319 Oao Gazprom ADR 6,461 284,930 1,140,883 Singapore--1.9% DBS Group Holdings Ltd. 21,000 305,434 Singapore Airlines Ltd. 49,466 619,532 924,966 South Africa--1.0% MTN Group Ltd. 33,152 507,657 South Korea--2.3% LG Telecom Ltd. 32,160 (a) 324,096 Samsung Fire & Marine Insurance Co., Ltd. 1,940 417,729 Shinsegae Co., Ltd. 550 382,938 1,124,763 Sweden--2.7% Tele2 AB, Class B 27,043 584,733 Telefonaktiebolaget LM Ericsson, Class B 184,594 739,511 1,324,244 Switzerland--8.7% ABB Ltd. 20,503 540,193 Bank Sarasin & Cie AG 70 307,983 Compagnie Financiere Richemont SA 7,518 498,422 Nestle SA 1,909 857,959 Nobel Biocare Holding AG 1,289 349,194 Novartis AG 9,942 548,916 Roche Holding AG 3,635 659,404 Syngenta AG 2,409 519,600 4,281,671 Taiwan--0.7% Taiwan Semiconductor Manufacturing Co., Ltd. 169,000 329,402 Thailand--1.8% Advanced Info Service PCL 121,900 337,333 Bangkok Bank Public Company Ltd. 58,600 211,918 Bank of Ayudhya PCL 396,400 329,136 878,387
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust Newton International Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------------ United Kingdom--18.6% Admiral Group PLC 18,531 341,163 Anglo American PLC 12,435 836,624 BP PLC 82,855 961,845 British American Tobacco PLC 22,680 812,827 Cable & Wireless PLC 173,511 653,079 Eaga PLC 47,007 (a) 190,392 GlaxoSmithKline PLC 21,930 581,834 ICAP PLC 73,589 793,312 Old Mutual PLC 69,538 227,977 Prudential PLC 34,675 533,048 Smith & Nephew PLC 29,129 356,028 Standard Chartered PLC 22,697 753,801 Tesco PLC 51,777 465,232 Vodafone Group PLC 238,503 861,111 Xstrata PLC 11,529 765,056 9,133,329 TOTAL EQUITIES (Cost $39,156,319) 47,931,822 PREFERRED STOCKS--1.1% Brazil--1.1% Companhia Vale do Rio Doce ADR (Cost $365,961) 18,392 523,252 TOTAL UNAFFILIATED INVESTMENTS (Cost $39,522,280) 48,455,074 AFFILIATED INVESTMENTS--1.2% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $563,885) 563,885 (b) 563,885 ---------- TOTAL INVESTMENTS--99.8% (Cost $40,086,165) 49,018,959 OTHER ASSETS, LESS LIABILITIES--0.2% 115,478 ---------- NET ASSETS--100% 49,134,437 ==========
Notes to Schedule of Investments: ADR--American Depository Receipts GDR--Global Depository Receipts (a) Non-income producing security. (b) Affiliated institutional money market fund. The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust Newton International Equity Fund Schedule of Investments--September 30, 2007 -------------------------------------------------------------------------------- At September 30, 2007 the Fund held the following forward foreign currency exchange contracts:
Local Principal Contract Value at USD Amount Unrealized Contracts to Deliver Amount Value Date September 30, 2007 to Receive (Depreciation) --------------------------------------------------------------------------------------------------------------------------------- Malaysian Ringgit 1,450,000 11/15/2007 $ 426,408 $ 420,473 $ (5,935) Norwegian Krone 2,132,221 10/15/2007 395,202 351,602 (43,600) Singapore Dollar 625,135 11/15/2007 422,477 409,736 (12,741) ---------- ---------- -------- $1,244,087 $1,181,811 $(62,276) ========== ========== ========
Local Principal Contract Value at USD Amount Unrealized Contracts to Receive Amount Value Date September 30, 2007 to Deliver Appreciation --------------------------------------------------------------------------------------------------------------------------------- Euro 41,274 10/1/2007 $ 58,857 $ 58,436 $ 421 Euro 56,608 10/2/2007 80,724 80,299 425 Malaysian Ringgit 1,450,000 11/15/2007 426,408 432,126 (5,718) Malaysian Ringgit 2,438,370 1/15/2008 692,174 685,000 7,174 Norwegian Krone 2,132,221 10/15/2007 395,202 353,660 41,542 Russian Ruble 8,659,440 3/14/2008 346,479 342,000 4,479 Singapore Dollar 625,135 11/15/2007 422,477 417,613 4,864 Singapore Dollar 512,776 2/15/2008 348,712 343,000 5,712 Singapore Dollar 509,988 2/15/2008 346,815 342,000 4,815 Swedish Krona 2,284,091 2/15/2008 355,843 343,000 12,843 ---------- ---------- -------- $3,473,691 $3,397,134 $ 76,557 ========== ========== ========
Percentage of Economic Sector Allocation Net Assets --------------------------------------------------------- Consumer Discretionary 10.6% Consumer Staples 7.7 Energy 9.0 Financials 21.0 Health Care 6.8 Industrials 11.5 Information Technology 6.7 Materials 11.8 Telecommunication Services 10.1 Utilities 3.4 Short-term and Other Assets 1.4 ----- 100.0%
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust Newton International Equity Fund Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investments in securities, at value (Note 1A): Unaffiliated investments (cost $39,522,280) $48,455,074 Affiliated investments (Note 1H) (cost $563,885) 563,885 Cash 74,872 Foreign currency, at value (cost $83,826) 85,790 Receivable for investments sold 528,939 Interest and dividends receivable 135,248 Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 82,275 Receivable from advisor (Note 2) 17,865 Prepaid expenses 2,583 ----------- Total assets 49,946,531 Liabilities Payable for investments purchased $ 572,642 Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 67,994 Accrued investment advisory fee (Note 2) 93,130 Accrued professional fees 41,882 Accrued accounting, custody, administration and transfer agent fees (Note 2) 33,065 Accrued trustees' fees (Note 2) 1,326 Accrued chief compliance officer fee (Note 2) 367 Accrued shareholder reporting fee (Note 2) 147 Other accrued expenses and liabilities 1,541 ----------- Total liabilities 812,094 ----------- Net Assets $49,134,437 =========== Net Assets consist of: Paid-in capital $37,130,415 Accumulated net realized gain 2,718,817 Undistributed net investment income 334,026 Net unrealized appreciation 8,951,179 ----------- Total Net Assets $49,134,437 ----------- Shares of beneficial interest outstanding 1,824,077 ----------- Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 26.94 ===========
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust Newton International Equity Fund Statement of Operations For the Year Ended September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments (net of foreign withholding taxes $112,484) $ 1,109,416 Dividend income from affiliated investments (Note 1 H) 18,858 Interest income 985 ----------- Total investment income 1,129,259 Expenses Investment advisory fee (Note 2) $ 347,485 Accounting, custody, administration and transfer agent fees (Note 2) 135,208 Professional fees 49,809 Registration fees 19,758 Trustees' fees and expenses (Note 2) 4,301 Insurance expense 2,830 Miscellaneous expenses 32,004 ----------- Total expenses 591,395 Deduct: Waiver of investment advisory fee (Note 2) (91,606) ----------- Net Expenses 499,789 ----------- Net investment income 629,470 ----------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 2,734,235 Foreign currency transactions and forward foreign currency exchange transactions 12,079 ----------- Net realized gain (loss) 2,746,314 Change in unrealized appreciation (depreciation) on: Investments 6,785,579 Foreign currency translations and forward foreign currency exchange contracts 101,433 ----------- Change in net unrealized appreciation (depreciation) 6,887,012 ----------- Net realized and unrealized gain (loss) on investments 9,633,326 ----------- Net Increase in Net Assets from Operations $10,262,796 ===========
The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust Newton International Equity Fund Statements of Changes in Net Assets --------------------------------------------------------------------------------
For the period December 21, 2005 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 629,470 $ 413,018 Net realized gain (loss) 2,746,314 326,318 Change in net unrealized appreciation (depreciation) 6,887,012 2,064,167 ----------- ----------- Net increase (decrease) in net assets from investment operations 10,262,796 2,803,503 ----------- ----------- Distributions to Shareholders (Note 1C) From investment income (368,981) (464,918) From net realized gains on investments (228,378) -- ----------- ----------- Total distributions to Shareholders (597,359) (464,918) ----------- ----------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 6,010,275 31,000,100 Dividend reinvestment 105,224 14,918 Cost of shares redeemed -- (102) ----------- ----------- Net increase (decrease) in net assets from Fund share transactions 6,115,499 31,014,916 ----------- ----------- Total Increase (Decrease) in Net Assets 15,780,936 33,353,501 Net Assets At beginning of year 33,353,501 -- ----------- ----------- At end of year [including undistributed net investment income and distributions in excess of net investment income of $334,026 and ($35,934), respectively] $49,134,437 $33,353,501 =========== ===========
The accompanying notes are an integral part of the financial statements. 15 Mellon Institutional Funds Investment Trust Newton International Equity Fund Financial Highlights --------------------------------------------------------------------------------
For the period December 21, 2005 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------ ------------------ Net Asset Value, Beginning of Year $21.51 $20.00 ------ ------ From Operations: Net investment income* (a) 0.35 0.27 Net realized and unrealized gains (loss) on investments 5.41 1.54 ------ ------ Total from operations 5.76 1.81 ------ ------ Less Distributions to Shareholders: From net investment income (0.20) (0.30) From net realized gains on investments (0.13) -- ------ ------ Total distributions to shareholders (0.33) (0.30) ------ ------ Net Asset Value, End of Year $26.94 $21.51 ====== ====== Total Return (b) 26.92% 9.15%(d) Ratios/Supplemental data: Expenses (to average daily net assets)* 1.15% 1.15%(c) Net Investment Income (to average daily net assets)* 1.45% 1.63%(c) Portfolio Turnover 87% 84%(d) Net Assets, End of Year (000's omitted) $49,134 $33,354
---------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios, excluding waivers and reimbursement, would have been: Net investment income per share (a) $0.30 $0.21 Ratios (to average daily net assets): Expenses 1.36% 1.53%(c) Net investment income 1.24% 1.25%(c)
(a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) Computed on an annualized basis. (d) Not annualized. Returns for periods of less than one year have not been annualized. The accompanying notes are an integral part of the financial statements. 16 Mellon Institutional Funds Investment Trust Newton International Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Newton International Equity Fund (the "Fund"), which commenced operation on December 21, 2005, is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in common stocks or securities convertible into common stocks (such as convertible preferred stocks, warrants and convertible bonds) of foreign companies and depositary receipts evidencing ownership in such securities. At least 75% of the Fund's net assets will be invested in countries represented in the Morgan Stanley Capital International Europe, Australasia and the Far East (MSCI EAFE) Index. The Fund may invest up to 20% of its assets in emerging market countries. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Because foreign markets may be open at different times than the NYSE, the value of the Fund's shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect the events that occur after such close but before the close of the NYSE. If market quotations are not readily available or do not accurately reflect fair value, or the value of a security has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), the Fund may value its assets by a method the Trustees believe accurately reflects the fair value. The Trustees have adopted fair value pricing procedures, which, among other things, require the Fund to fair value such securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised by the Trustees from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices for foreign securities will be used by the Fund to a significant extent. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. 17 Mellon Institutional Funds Investment Trust Newton International Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to differing treatments for foreign currency transactions and losses deferred due to wash sales and passive foreign investment companies (PFIC). Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end will be distributed in the following year. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Foreign currency transactions The Fund maintains its books and records in U.S. dollars. Investment security valuations and other assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. F. Foreign investment risk There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. G. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. 18 Mellon Institutional Funds Investment Trust Newton International Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- H. Affiliated issuers Affiliated issuers are investment companies advised by Newton Capital Management Ltd. ("Newton"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. I. New accounting requirements The Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to Newton for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 0.80% of the Fund's average daily net assets. Newton voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 1.15% of the Fund's average daily net assets for the year ended September 30, 2007. Pursuant to this agreement, for the year ended September 30, 2007, Newton voluntarily waived a portion of its investment advisory fee in the amount of $91,606. This arrangement is voluntary and temporary and may be discontinued or revised by Newton at any time. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of Newton, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $6,630 for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of Newton, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $128,578 for the year ended September 30, 2007. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $2,780 for the year ended September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. See Note 7 for further details. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,250, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of Newton or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of Newton or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of Newton, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $1,344, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan 19 Mellon Institutional Funds Investment Trust Newton International Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was not charged an administrative service fee by an affiliate of BNY Mellon. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of Newton, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ------------- ------------- Non-U.S. Government Securities $ 42,649,247 $ 37,112,861 ============= =============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the period December 21, 2005 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 269,340 1,549,732 Shares issued to shareholders in reinvestment of distributions 4,269 741 Shares redeemed - (5) ------- --------- Net increase (decrease) 273,609 1,550,468 ======= =========
At September 30, 2007, three shareholders of record, in the aggregate held approximately 97.2% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund did not assess any redemption fees. (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined. 20 Mellon Institutional Funds Investment Trust Newton International Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $40,130,731 =========== Gross unrealized appreciation $ 9,594,551 Gross unrealized depreciation (687,938) ----------- Net unrealized appreciation (depreciation) $ 8,906,613 =========== Undistributed ordinary income $ 1,893,414 Undistributed capital gains 1,203,996 ----------- Total distributable earnings $ 3,097,410 ===========
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006, was as follows: 2007 2006 ----------- ----------- Ordinary income $ 597,359 $ 464,918 ----------- ----------- Capital gains -- -- ----------- -----------
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Forward Foreign Currency Exchange Contracts The Fund may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any appreciation or depreciation are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At September 30, 2007, the Fund held forward foreign currency exchange contracts. See Schedule of Investments for further details. (7) Line of Credit: On behalf of the Fund and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund had average borrowings outstanding of $194,782 for a total of 78 days and incurred $1,925 of interest expense. At September 30, 2007, the Fund did not have a loan balance outstanding. 21 Mellon Institutional Funds Investment Trust Newton International Equity Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of Newton International Equity Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Newton International Equity Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period from December 21, 2005 (commencement of operations) to September 30, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York December 4, 2007 22 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $612 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $612 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $612 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $646 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* * Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 23 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years --------------------------------------------------------------------------------------------------------------------------------- Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 24 THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6912AR0907 MELLON INSTITUTIONAL FUNDS Annual Report Standish Mellon Intermediate Tax Exempt Bond Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Management Discussion and Analysis -------------------------------------------------------------------------------- For the year ended September 30, 2007, the Standish Mellon Intermediate Tax Exempt Bond Fund produced a total return after expenses of 3.26%. This result trailed the benchmark performance index (Lehman Brothers Municipal 3-5-7-10 Year Municipal Bond Index) return of 3.73%. Tax-exempt interest rates changed only modestly during the last 12 months in spite of highly visible turmoil from subprime mortgages, a midsummer contraction of bond market liquidity and a half-point cut by the U.S. Federal Reserve in a key overnight interest rate. In the widening credit turmoil that roiled worldwide bond markets this summer, investors fled risky assets for the safe haven of government bonds and notes. A repricing of risk in July and August caused underperformance among many of the income-oriented municipal revenue bond sectors which had consistently produced excess returns over the last few years. Weightings in hospitals and housing detracted from relative returns as investors abandoned those sectors in favor of triple-A rated government-backed pre-refunded bonds. In addition, tax-exempt bonds tied to corporations, particularly pre-paid natural gas and tobacco securitization bonds, traded off in concert with trends among corporate bonds in the taxable markets. After another year of steady ratings upgrades, we believe municipal credit quality is leveling out, albeit at a very high level. Average credit quality among intermediate municipals is double-A. The Fund established a position in bonds issued by the Commonwealth of Puerto Rico, which benefited during the period from improving creditworthiness and strengthened financial management. While U.S. gross domestic product may slow to below trend over the next year, we believe that healthy corporate balance sheets, higher government spending, export growth and income expansion should all help stave off recession. The continuing downturn in housing and spreading financial contagion from subprime mortgages may force the Federal Reserve to lower short-term interest rates again by early 2008. Inflation does not appear to be a problem, which relieves upward pressures on longer-term rates. Amidst heightened credit market volatility, the Fund continues to emphasize high credit quality and a neutral interest rate posture. As we write this, municipal bonds are priced attractively relative to Treasury securities, producing a substantial after-tax yield advantage for shareholders in all but the lowest federal tax brackets. In addition, the 2001 and 2003 tax cuts are set to expire in 2010, making tax-exempt bonds potentially more valuable in coming years. It has been our privilege to manage the Fund, and we thank you for your continued support. Sincerely, Christine Todd, CFA Steven Harvey Portfolio Manager Portfolio Manager Standish Mellon Asset Standish Mellon Asset Management Company, LLC Management Company, LLC 2 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Comparison of Change in Value of $100,000 Investment in Standish Mellon Intermediate Tax Exempt Bond Fund and the Lehman Brothers 3-5-7-10 Year Municipal Bond Index (Unaudited) --------------------------------------------------------------------------------
Standish Mellon Lehman Brothers PERIOD Intermediate Tax Exempt 3-5-7-10 Year Muni Bond Index* Bond Fund 9/30/97 100,000 100,000 12/31/97 102,078 101,971 3/31/98 103,040 103,085 6/30/98 104,363 104,353 9/30/98 107,228 107,272 12/31/98 107,585 108,098 3/31/99 108,314 109,061 6/30/99 106,456 107,517 9/30/99 106,860 108,430 12/31/99 106,658 108,447 3/31/00 108,612 110,108 6/30/00 109,928 111,810 9/30/00 112,123 114,138 12/31/00 115,678 117,598 3/31/01 118,235 120,649 6/30/01 119,060 121,664 9/30/01 122,198 124,957 12/31/01 121,351 124,243 3/31/02 122,242 125,258 6/30/02 126,473 130,082 9/30/02 131,557 135,055 12/31/02 131,898 135,582 3/31/03 133,288 137,058 6/30/03 136,226 139,967 9/30/03 136,688 140,863 12/31/03 137,617 141,682 3/31/04 139,137 143,495 6/30/04 136,296 140,605 9/30/04 140,487 144,910 12/31/04 141,663 145,867 3/31/05 140,494 144,565 6/30/05 143,781 147,811 9/30/05 143,550 147,469 12/31/05 144,238 148,160 3/31/06 144,385 148,123 6/30/06 144,547 148,370 9/30/06 148,685 152,654 12/31/06 149,823 153,747 3/31/07 151,160 155,113 6/30/07 150,500 154,558 9/30/07 153,530 158,342
Average Annual Total Returns (for period ended 9/30/2007) --------------------------------------------------------------------------------
Since Inception 1 Year 3 Years 5 Years 10 Years 11/2/1992 -------------------------------------------------------------------------------- Fund 3.26% 3.00% 3.14% 4.38% 5.19%
* Source: Lipper Inc. Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 3 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ------------------------------------------------------------------------------------------------ Actual $ 1,000.00 $ 1,015.70 $ 2.27 Hypothetical (5% return per year before expenses) $ 1,000.00 $ 1,022.81 $ 2.28
----------- + Expenses are equal to the Fund's annualized expense ratio of 0.45%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 4 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Rate Maturity Investments ------------------------------------------------------------------------------------------------------- Golden State Tobacco Securitization Corp. 4.500% 6/1/2027 2.3% Tennessee Energy Acquisition Corporation 5.250 9/1/2017 1.6 New York State Dormitory Authority Revenue 5.250 11/15/2023 1.4 Puerto Rico Public Finance Corp. LOC: Government Development Bank for Puerto Rico 5.750 8/1/2027 1.2 Tobacco Settlement Funding Corp. NJ 4.500 6/1/2023 1.2 Wisconsin State COP MBIA NCL 5.000 3/1/2010 1.2 Puerto Rico Commonwealth Fuel Sales Tax Revenue 5.000 7/1/2018 1.2 Oklahoma DFA Revenue Hillcrest Healthcare System Prerefunded 5.625 8/15/2019 1.2 Tobacco Settlement Financing Corporation NJ Prerefunded 6.250 6/1/2043 1.2 New York State Dormitory Authority State University Educational Facilities MBIA IBC 5.250 5/15/2015 1.1 ---- 13.6%
* Excluding short-term investments.
Percentage of Economic Sector Allocation Net Assets ------------------------------------------------------------ General Obligations 12.2% Government Backed 11.3 Housing Revenue 4.3 Industrial Development 6.8 Insured Bonds 41.7 Lease Revenue 5.1 Revenue Bonds 12.3 Special Revenues 3.0 Short-term and Net Other Assets 3.3 ----- 100.0%
Summary of Combined Ratings+ -------------------------------------------------------------------------------- Percentage of Quality Breakdown Investments -------------------------------------------------------------------------------- AAA 62.2% AA 22.4 A 4.4 BBB 10.0 BB 1.0 ----- Total 100.0%
+ Based on ratings from Standard & Poor's and/or Moody's Investors Services. If a security receives split (different) ratings from multiple rating organizations, the Fund treats the security as being rated in the higher rating category. The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Par Value ($) Security Rate Maturity Value (Note 1A) ------------------------------------------------------------------------------------------------------------------------------------ BONDS--96.7% General Obligations--12.2% ABAG CA Odd Fellows Homes 5.700% 8/15/2014 1,000,000 1,011,500 Austin TX Independent School District PSF-GTD NCL 5.000 8/1/2016 1,000,000 1,081,440 California State 5.000 10/1/2011 70,000 72,819 California State 5.000 6/1/2014 1,435,000 1,539,798 California State 5.000 8/1/2016 750,000 809,332 Commonwealth of Massachusetts NCL 6.000 11/1/2010 1,350,000 1,444,365 Commonwealth of Massachusetts 5.000 7/1/2012 2,000,000 2,118,320 Magnolia TX Independent School District Refunding PSF-GTD 5.000 8/15/2018 1,000,000 1,074,910 New York NY 5.250 9/1/2014 1,000,000 1,087,370 New York NY NCL 5.000 6/1/2011 1,000,000 1,045,830 New York NY Series B NCL 5.000 8/1/2011 770,000 806,783 New York NY Series H NCL 5.000 8/1/2011 1,700,000 1,781,209 New York NY NCL 5.000 8/1/2013 1,500,000 1,598,880 Pasadena TX Independent School District PSF-GTD NCL 5.000 2/15/2015 1,360,000 1,461,238 Puerto Rico Commonwealth Fuel Sales Tax Revenue (a) 5.000 7/1/2018 2,325,000 2,348,575 Puerto Rico Public Building Authority Revenue (a) 5.000 7/1/2028 1,000,000 1,040,130 San Antonio TX Apartment Systems Revenue AMT FSA 5.000 7/1/2013 1,000,000 1,055,540 San Antonio TX 5.000 2/1/2015 1,000,000 1,074,090 Spring Branch TX Independent School District PSF GTD 5.625 2/1/2014 1,000,000 1,104,100 Texas Refunding AMT NCL 5.000 8/1/2017 1,000,000 1,066,310 ------------ 24,622,539 ------------ Government Backed--11.3% Alpine UT School District Prerefunded 5.000 3/15/2011 25,000 25,359 Dallas TX Independent School District Prerefunded 5.500 2/15/2017 1,500,000 1,615,395 District of Columbia MBIA NCL Prerefunded 5.750 6/1/2010 10,000 10,561 Golden State Tobacco Securitization Corp. Prerefunded 5.000 6/1/2021 155,000 156,651 Goose Creek TX Independent School District PSF-GTD Prerefunded 7.000 8/15/2009 110,000 116,974 Goose Creek TX Independent School District PSF-GTD Unrefunded 7.000 8/15/2009 260,000 275,660 Goose Creek TX Independent School District PSF-GTD Escrowed to maturity 7.000 8/15/2009 230,000 244,582 Massachusetts DFA Williston School Prerefunded 6.000 10/1/2013 185,000 191,240 Massachusetts MBIA Prerefunded 5.500 11/1/2015 1,000,000 1,070,650 Massachusetts State FSA Prerefunded 5.000 12/1/2023 1,000,000 1,082,390 Met Govt Nashville & Davidson TN Industrial Development Board Revenue Prerefunded 7.500 11/15/2010 1,000,000 1,095,460 Milwaukee WI Metropolitan Sewer District Prerefunded 5.250 10/1/2019 1,000,000 1,087,130 New Jersey State Transportation FSA 5.750 12/15/2014 770,000 871,009 Northern TOB Securitization Corp. Alaska Prerefunded 6.500 6/1/2031 1,000,000 1,073,170 Northern TOB Securitization Corp. Alaska Prerefunded 4.750 6/1/2015 425,000 428,553 Oklahoma DFA Revenue Prerefunded 5.625 8/15/2029 1,000,000 1,047,770 Oklahoma DFA Revenue Hillcrest Healthcare System Prerefunded 5.625 8/15/2019 2,185,000 2,289,377 Osceola County School Board FL COP AMBAC Prerefunded 5.250 6/1/2027 1,000,000 1,079,530 Palm Beach County FL Solid Waste AMBAC 6.000 10/1/2009 60,000 62,912 Puerto Rico Commonwealth Highway & Transportation Authority Revenue 5.750 7/1/2041 1,500,000 1,644,210 Texas Municipal Power Agency MBIA (b) 0.000 9/1/2016 10,000 7,008 Tobacco Settlement Authority IA 5.600 6/1/2035 2,000,000 2,152,080 Tobacco Settlement Funding Corporation NJ Prerefunded 5.000 6/1/2010 500,000 517,715 Tobacco Settlement Funding Corporation NJ Prerefunded 4.375 6/1/2019 215,000 216,183 Tobacco Settlement Funding Corporation NJ Prerefunded 6.750 6/1/2039 1,855,000 2,142,488 Tobacco Settlement Funding Corporation NJ Prerefunded 6.250 6/1/2043 2,000,000 2,259,300 ------------ 22,763,357 ------------
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Par Value ($) Security Rate Maturity Value (Note 1A) ------------------------------------------------------------------------------------------------------------------------------------ Housing Revenue--4.3% California Housing Finance Agency AMT 4.600% 2/1/2041 1,500,000 1,500,495 Colorado HFA Single Family Project AMT (a) 6.800 2/1/2031 1,275,000 1,352,941 Colorado HFA Single Family Project AMT (a) 6.600 8/1/2032 990,000 1,046,925 Florida Housing Finance Corp. FSA 5.750 1/1/2017 25,000 25,142 Illinois Financial Authority Student Housing Revenue NCL 5.000 6/1/2012 1,160,000 1,130,780 Ohio HFA Mortgage Revenue AMT GNMA 5.350 9/1/2018 175,000 177,469 Rhode Island Housing & Mortgage Finance Corp. 4.950 10/1/2016 135,000 136,737 Utah HFA AMT SFM 5.400 7/1/2020 170,000 171,377 Virginia Housing Development Authority, Commonwealth Mortgage Revenue AMT NCL 4.250 7/1/2013 2,000,000 1,990,320 Wyoming Community Development Authority Housing Revenue AMT 5.500 12/1/2017 1,000,000 1,068,000 ------------ 8,600,186 ------------ Industrial Development--6.8% Connecticut Gaming Authority Mohegan Tribe 5.375 1/1/2011 900,000 912,177 Dayton OH Special Facilities Revenue AMT NCL 6.200 10/1/2009 1,000,000 1,043,330 Gloucester NJ Resource Recovery (a) 6.850 12/1/2029 500,000 524,005 Golden State Tobacco Securitization Corp. 4.500 6/1/2027 4,735,000 4,434,612 Hendersonville TN Kroger 5.950 12/15/2008 120,000 121,478 Massachusetts DFA Waste Management Resource Recovery AMT (a) 6.900 12/1/2029 500,000 523,990 Northern TOB Securitization Corp. AK 4.625 6/1/2023 980,000 942,221 San Manuel Entertainment Series 2004-C 4.500 12/1/2016 1,000,000 975,740 Tobacco Settlement Authority of Southern California 4.750 6/1/2025 975,000 925,577 Tobacco Settlement Authority WA 6.500 6/1/2026 935,000 980,553 Tobacco Settlement Funding Corp. NJ 4.500 6/1/2023 2,540,000 2,386,482 ------------ 13,770,165 ------------ Insured Bonds--41.7% Alabama Agriculture & Mechanical University Revenue AMBAC NCL 5.000 11/1/2013 1,000,000 1,072,960 Atlanta GA Airport Revenue AMT FSA NCL 5.250 1/1/2012 900,000 948,852 Atlanta GA Airport Revenue AMT FSA NCL 5.250 1/1/2013 1,000,000 1,062,920 Broward County FL School Board COP AMBAC 5.000 7/1/2013 1,000,000 1,057,650 Broward County FL School Board COP FGIC 5.000 7/1/2013 1,000,000 1,057,650 Bourbonnais IL Industrial Project Revenue NCL RADIAN 5.000 11/1/2015 1,000,000 1,036,260 California State AMBAC 6.000 4/1/2016 1,000,000 1,155,300 Carroll TX Independent School District MBIA 5.000 2/15/2016 1,155,000 1,246,615 Charleston SC COP MBIA 6.000 12/1/2008 1,000,000 1,028,610 Chicago IL AMBAC AMT 5.500 1/1/2012 1,000,000 1,045,810 Chicago IL Transportation Authority AMBAC 5.250 6/1/2013 1,000,000 1,080,580 Chicago O'Hare International Airport IL Revenue FGIC 5.250 1/1/2014 1,000,000 1,076,990 Chicago O'Hare International Airport IL Revenue MBIA NCL 5.250 1/1/2017 1,000,000 1,090,090 Citizens Property Insurance Corp. FL MBIA 5.000 3/1/2014 1,000,000 1,070,620 Clark County NV AMBAC 5.000 11/1/2013 1,000,000 1,070,150 Clark County NV Airport Revenue AMT FGIC NCL 5.250 7/1/2012 1,000,000 1,060,120 Cleveland OH Waterworks Revenue MBIA 5.500 1/1/2013 1,500,000 1,574,385 Colorado State Department of Corrections Penitentiary II Project B AMBAC 5.000 3/1/2015 1,000,000 1,078,850 Cook County IL High School FGIC NCL 7.875 12/1/2014 750,000 951,840 Cook County IL School District FSA NCL 6.750 5/1/2010 1,750,000 1,886,272 Denver Colorado City and County Airport Revenue AMT FGIC 5.250 11/15/2013 1,000,000 1,062,030 Detroit MI City School District FSA NCL 5.000 5/1/2014 1,000,000 1,075,260 Detroit MI Sewer Disposal Revenue FSA NCL 5.250 7/1/2019 1,000,000 1,102,350
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Par Value ($) Security Rate Maturity Value (Note 1A) ------------------------------------------------------------------------------------------------------------------------------------ Insured Bonds (continued) Detroit MI Sewer Disposal Revenue MBIA NCL 5.000% 7/1/2013 1,000,000 1,069,870 District of Columbia MBIA NCL 5.750 6/1/2010 15,000 15,811 Douglas County CO School District MBIA 7.000 12/15/2012 625,000 722,669 Fairfax County VA EDA Residential Recovery AMBAC AMT NCL 6.100 2/1/2011 1,000,000 1,069,590 Farmington NM Pollution Control Revenue FGIC (a) 3.550 4/1/2029 2,000,000 1,992,920 Fort Bend County TX MBIA NCL 5.000 3/1/2014 1,000,000 1,070,030 Golden State Tobacco Securitization Corp. AMBAC (4.60% beginning 6/1/2010) (c) 0.000 6/1/2023 750,000 658,005 Golden State Tobacco Securitization Corp. AMBAC 5.000 6/1/2010 500,000 512,985 Harris County TX Health Facility Development Corp. MBIA 6.000 6/1/2013 1,000,000 1,108,910 Harris County TX Toll Revenue FGIC NCL 6.000 8/1/2012 1,000,000 1,102,630 Hawaii Harbor AMT FSA 5.000 1/1/2014 1,000,000 1,060,950 Hillsborough County FL Assessment Revenue FGIC 5.000 3/1/2013 1,000,000 1,057,660 Hillsborough County FL Utility Revenue AMBAC 5.500 8/1/2012 1,000,000 1,081,620 Honolulu Hawaii City & County Board Water Supply AMT MBIA 5.000 7/1/2014 1,000,000 1,061,580 Indianapolis IN Airport Authority AMT AMBAC 5.000 1/1/2017 1,000,000 1,052,740 Intermountain Power Agency UT MBIA NCL 6.500 7/1/2010 1,000,000 1,076,430 Louisville & Jefferson County KY Regional Airport Authority Revenue FSA AMT 5.500 7/1/2011 1,355,000 1,434,606 Lubbock County TX FSA 4.500 2/15/2021 1,000,000 1,006,030 Massachusetts HEFA Lahey Clinic Medical Center FGIC 5.000 8/15/2014 1,000,000 1,071,260 Mesa AZ Utility System Revenue FGIC 5.000 7/1/2018 1,000,000 1,090,240 Mesa AZ Utility System Revenue MBIA NCL 6.000 7/1/2020 1,250,000 1,483,837 Metropolitan Washington DC Airports Authority Airport System Revenue AMT AMBAC NCL 5.000 10/1/2015 1,000,000 1,059,420 Metropolitan Washington DC Airports Authority Airport System Revenue AMT FGIC NCL 5.500 10/1/2012 1,715,000 1,839,235 Metropolitan Washington DC Airports Authority Airport System Revenue AMT MBIA 5.000 10/1/2012 1,000,000 1,049,940 Miami Dade County FL Aviation Revenue AMT MBIA 5.250 10/1/2014 1,000,000 1,067,690 Midlothian TX Development Authority RADIAN 5.000 11/15/2013 530,000 546,865 Minneapolis and Saint Paul MN Metropolitan Airports Commission Airports Revenue FGIC NCL 5.000 1/1/2016 1,000,000 1,073,940 Nassau County NY FGIC 6.000 7/1/2010 25,000 26,613 New Jersey Health Care Facilities Financing Authority Revenue AMBAC 4.800 8/1/2021 350,000 352,114 New Jersey State Transportation FSA 5.750 12/15/2014 230,000 258,932 New Jersey Transit Corporation COP AMBAC NCL 5.250 9/15/2014 1,000,000 1,085,270 New York State Dormitory Authority Presbyterian Hospital AMBAC 4.400 8/1/2013 10,000 10,030 New York State Dormitory Authority State University Educational Facilities MBIA 6.000 5/15/2015 1,000,000 1,072,380 New York State Dormitory Authority State University Educational Facilities MBIA IBC 5.250 5/15/2015 2,000,000 2,171,280 North Carolina Medical Care Community HCF Revenue AMBAC 5.000 10/1/2012 750,000 795,495 North Slope Boro Alaska MBIA 5.000 6/30/2016 1,000,000 1,083,850 Palm Beach County FL Public Improvement Revenue AMBAC 5.000 6/1/2015 1,000,000 1,081,140 Palm Beach County FL School Board COP MBIA 5.000 8/1/2011 1,000,000 1,043,050 Palm Beach County FL School Board COP AMBAC 5.000 8/1/2013 1,000,000 1,060,010 Palm Beach County FL Solid Waste Authority Revenue AMBAC 5.000 10/1/2011 1,000,000 1,047,860 Pasco County FL Solid Waste AMBAC AMT NCL 6.000 4/1/2010 1,000,000 1,054,080 Pennsylvania Economic DFA Resource Recovery Revenue; Colver Project AMT AMBAC 5.000 12/1/2012 1,000,000 1,048,060
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Par Value ($) Security Rate Maturity Value (Note 1A) ------------------------------------------------------------------------------------------------------------------------------------ Insured Bonds (continued) Philadelphia PA School District FSA NCL 5.750% 2/1/2011 1,000,000 1,067,780 Platte River Power Authority CO Power Revenue FSA 5.000 6/1/2013 2,000,000 2,142,160 Port Authority NY & NJ AMT FGIC 5.000 10/1/2013 1,000,000 1,064,890 Port Saint Lucie FL Community Redevelopment Agency Revenue MBIA 5.000 1/1/2019 1,550,000 1,648,983 Port of Seattle WA Revenue AMBAC 5.000 10/1/2014 2,000,000 2,126,000 Puerto Rico Electric Power Authority Revenue XLCA 5.500 7/1/2016 500,000 561,915 Raleigh Durham NC Airport Authority AMT FGIC NCL 5.000 5/1/2014 1,190,000 1,258,187 Saint Louis MO Airport Revenue FSA NCL 5.000 7/1/2014 1,250,000 1,338,438 Saint Louis MO Airport Revenue FSA 5.000 7/1/2013 1,000,000 1,066,130 Stafford TX Economic Development FGIC 6.000 9/1/2015 525,000 600,563 Sweetwater County WY Improvement Project Powers Board Lease Revenue MBIA 5.000 12/15/2009 1,120,000 1,154,978 Wisconsin State COP MBIA NCL 5.000 3/1/2010 2,295,000 2,368,486 ------------ 83,918,301 ------------ Lease Revenue--5.1% Greenville County SC School District 5.000 12/1/2011 1,000,000 1,047,700 New Jersey B PPTYS Lease Revenue King County Washington Project 5.000 12/1/2014 1,000,000 1,077,170 New Jersey Economic Development Authority Revenue School Facilities Construction NCL 5.000 9/1/2012 1,000,000 1,058,780 New York State Dormitory Authority Revenue (a) 5.250 11/15/2023 2,500,000 2,658,600 New York State Thruway Authority Service Contract Revenue NCL 5.000 4/1/2011 1,000,000 1,045,580 Puerto Rico Public Finance Corp. LOC: Government Development Bank for Puerto Rico (a) 5.750 8/1/2027 2,250,000 2,394,787 Tobacco Settlement Funding Corp. NY 5.250 6/1/2013 1,000,000 1,010,110 ------------ 10,292,727 ------------ Revenue Bonds--12.3% Alaska Student Loan Corp. Revenue AMT NCL 5.250 6/1/2014 1,000,000 1,078,470 Energy Northwest Washington Electricity Revenue 5.000 7/1/2011 1,000,000 1,048,580 Energy Northwest Washington Electricity Revenue 5.500 7/1/2015 1,000,000 1,112,360 Franklin County OH Revenue Refunding Trinity Health Credit NCL 5.000 6/1/2014 1,340,000 1,409,600 Illinois DFA Depaul University NCL 5.500 10/1/2011 1,000,000 1,053,360 Illinois HEFA Condell Medical Center 6.000 5/15/2010 270,000 274,544 Indiana Health Facility Financing Authority Revenue 5.000 11/1/2011 500,000 520,920 Lubbock TX Health Facilities Development St. Joseph Healthcare System 5.000 7/1/2008 2,000,000 2,021,160 Main Street National Gas, Inc. Georgia Gas Project Revenue 5.000 3/15/2018 1,000,000 1,025,350 Massachusetts HEFA Partners NCL 5.000 7/1/2012 1,250,000 1,300,162 Metropolitan Transportation Authority NY Revenue 5.250 11/15/2014 1,000,000 1,088,980 Michigan State Hospital Finance Authority 5.250 11/15/2010 1,000,000 1,035,650 New Hampshire HEFA Mondanock Hospital 5.250 10/1/2007 100,000 100,000 New Mexico State Hospital Equipment Loan Revenue Presbyterian Healthcare Services Prerefunded 5.750 8/1/2012 1,000,000 1,084,160 New York City NY Industrial Development Agency Special Facility Revenue AMT 5.500 1/1/2014 1,000,000 1,072,390 Puerto Rico Commonwealth Highway and Transportation Authority Revenue 5.000 7/1/2016 1,000,000 1,060,230 SA Energy Acquisition Public Facility Corporation TX Gas Supply Revenue 5.250 8/1/2014 1,000,000 1,055,630 Tennessee Energy Acquisition Corporation 5.250 9/1/2017 3,000,000 3,153,690 Texas Municipal Gas Acquisition and Supply Corporation I Gas Supply Revenue 5.000 12/15/2011 1,000,000 1,036,290 Texas Municipal Gas Acquisition and Supply Corporation I Gas Supply Revenue 5.000 12/15/2014 2,000,000 2,085,780 Texas Transportation Commission First Tier Revenue NCL TBA (d) 5.000 4/1/2016 1,000,000 1,079,640 ------------ 24,696,946 ------------
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Par Value ($) Security Rate Maturity Value (Note 1A) ------------------------------------------------------------------------------------------------------------------------------------ Special Revenues--3.0% Florida Hurricane Catastrophe Funding Financial Corp. (a) 5.250% 7/1/2012 2,000,000 2,132,740 Jicarilla NM Apache Nation Revenue 5.000 9/1/2013 500,000 522,060 Puerto Rico Commonwealth Government Development Bank 5.000 12/1/2015 1,000,000 1,058,280 Puerto Rico Commonwealth Government Development Bank AMT 5.250 1/1/2015 600,000 635,118 Scottsdale AZ Excise Tax Revenue 5.000 7/1/2015 1,550,000 1,680,185 Wisconsin State Transportation 5.500 7/1/2010 15,000 15,750 ------------ 6,044,133 ------------ TOTAL BONDS (Cost $193,878,407) 194,708,354 ------------ SHORT-TERM INVESTMENTS--2.0% Short-Term Bonds--2.0% Kansas State Department of Transportation Highway Revenue (a) 4.130 9/1/2020 1,700,000 1,700,000 Massachusetts State Development Finance Agency Revenue (a) 3.870 10/1/2042 400,000 400,000 Massachusetts State Development Finance Agency Revenue RADIAN (a) 6.000 7/1/2032 1,000,000 1,000,000 Massachusetts State Development Finance Agency Revenue RADIAN (a) 6.000 1/1/2033 1,000,000 1,000,000 ------------ Total Short-Term Bonds (Cost $4,100,000) 4,100,000 ------------ Shares Investment Companies--0.0% ------ Wells Fargo National Tax-Free Money Market Fund (Cost $18,780) 18,780 18,780 ------------ Total Short-Term Investments (Cost $4,118,780) 4,118,780 ------------ TOTAL INVESTMENTS--98.7% (Cost $197,997,187) 198,827,134 ------------ OTHER ASSETS, LESS LIABILITIES--1.3% 2,652,618 ------------ NET ASSETS--100% 201,479,752 ============
Notes to Schedule of Investments: AMBAC--American Municipal Bond Assurance Corporation AMT--Alternative Minimum Tax COP--Certificate of Participation DFA--Development Finance Authority EDA--Economic Development Authority FGIC--Financial Guaranty Insurance Company FSA--Financial Security Assurance GNMA--Government National Mortgage Association GTD--Guaranteed HEFA--Heatlth & Educational Facilities Authority HFA--Housing Finance Authority MBIA--Municipal Bond Investors Assurance Insurance Corporation NCL--Non-callable PSF--Permanent School Fund RADIAN--Radian Group SFM--Single Family Mortgage TBA--To Be Announced TOB--Tobacco XLCA--XL Capital Assurance Inc. (a) Variable Rate Security; rate indicated is as of September 30, 2007. Variable rate securities that reset monthly or more frequently are considered short-term securities for reporting purposes. (b) Zero coupon security. (c) Debt obligation initially issued in zero coupon form which converts to coupon form at a specific rate and date. (d) Delayed delivery security. The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investment in securities, at value (Note 1A) (cost $197,997,187) $198,827,134 Interest receivable 2,680,528 Receivable for Fund shares sold 1,351,716 Prepaid expenses 26,788 ------------ Total assets 202,886,166 Liabilities Payable for securities purchased $ 1,075,400 Payable for Fund shares redeemed 191,333 Distributions Payable 61,259 Accrued accounting, custody, administration and transfer agent fees (Note 2) 32,235 Accrued professional fees 28,145 Accrued administrative services expense (Note 2) 9,145 Accrued trustees' fees and expenses (Note 2) 4,964 Accrued shareholder reporting fee (Note 2) 1,711 Accrued chief compliance officer fee (Note 2) 367 Other accrued expenses and liabilities 1,855 ----------- Total liabilities 1,406,414 ------------ Net Assets $201,479,752 ------------ Net Assets consist of: Paid-in capital $200,883,396 Accumulated net realized loss (251,710) Undistributed net investment income 18,119 Net unrealized appreciation 829,947 ------------ Total Net Assets $201,479,752 ============ Shares of beneficial interest outstanding 9,329,109 ============ Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 21.60 ============
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Statement of Operations For the Year Ended September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Interest income $ 6,296,097 Dividend income 169,491 ------------ Total investment income 6,465,588 Expenses Investment advisory fee (Note 2) $ 632,093 Accounting, custody, administration and transfer agent fees (Note 2) 132,984 Registration fees 63,236 Professional fees 35,531 Administrative service fee (Note 2) 24,557 Trustees' fees and expenses (Note 2) 16,599 Insurance expense 5,527 Miscellaneous expenses 26,828 ----------- Total expenses 937,355 Deduct: Waiver of investment advisory fee (Note 2) (226,230) ----------- Net expenses 711,125 ------------ Net investment income 5,754,463 ------------ Realized and Unrealized Gain (Loss) Net realized gain (loss) on Investments 134,023 Change in unrealized appreciation (depreciation) on Investments (608,630) ------------ Net realized and unrealized gain (loss) on investments (474,607) ------------ Net Increase in Net Assets from Operations $ 5,279,856 ============
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Statements of Changes in Net Assets --------------------------------------------------------------------------------
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income $ 5,754,463 $ 4,198,620 Net realized gain (loss) 134,023 (258,860) Change in net unrealized appreciation (depreciation) (608,630) 304,871 ------------ ------------ Net increase (decrease) in net assets from investment operations 5,279,856 4,244,631 ------------ ------------ Distributions to Shareholders (Note 1C) From net investment income (5,754,463) (4,198,620) ------------ ------------ Total distributions to shareholders (5,754,463) (4,198,620) ------------ ------------ Fund Share Transactions (Note 4) Net proceeds from sale of shares 108,485,320 50,311,439 Value of shares isued to shareholders in reinvestment of distributions 5,083,310 3,487,897 Cost of shares redeemed (net of redemption fees of $1,133 and $0, respectively) (39,541,640) (35,231,940) ------------ ------------ Net increase (decrease) in net assets from Fund share transactions 74,026,990 18,567,396 ------------ ------------ Total Increase (Decrease) in Net Assets 73,552,383 18,613,407 Net Assets At beginning of year 127,927,369 109,313,962 ------------ ------------ At end of year (including undistributed net investment income of $18,119 and $18,119) $201,479,752 $127,927,369 ============ ============
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, ----------------------------------------------------------- 2007 2006 2005 2004 2003 -------- -------- -------- ------- -------- Net Asset Value, Beginning of Year $ 21.69 $ 21.71 $ 22.05 $ 22.78 $ 22.78 -------- -------- -------- -------- -------- From Investment Operations: Net investment income* (a) 0.78 0.78 0.77 0.69 0.81 Net realized and unrealized gains (loss) on investments (0.09) (0.02) (0.29) (0.08) 0.07 -------- -------- -------- -------- -------- Total from operations 0.69 0.76 0.48 0.61 0.88 -------- -------- -------- -------- -------- Less Distributions to Shareholders: From net investment income (0.78) (0.78) (0.77) (0.71) (0.81) From net realized gains on investments -- -- (0.05) (0.63) (0.07) -------- -------- -------- -------- -------- Total distributions to shareholders (0.78) (0.78) (0.82) (1.34) (0.88) -------- -------- -------- ------- -------- Net Asset Value, End of Year $ 21.60 $ 21.69 $ 21.71 $ 22.05 $ 22.78 ======== ======== ======== ======== ======== Total Return (b) 3.26% 3.58% 2.18% 2.76% 3.88% Ratios/Supplemental data: Expenses (to average daily net assets)* 0.45% 0.45% 0.45% 0.50% 0.65% Net Investment Income (to average daily net assets)* 3.63% 3.61% 3.50% 3.16% 3.58% Portfolio Turnover 10% 29% 35% 72% 42% Net Assets, End of Year (000's omitted) $201,480 $127,927 $109,314 $111,887 $ 70,505 ------------ * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios without waiver and reimbursement would have been: Net investment income per share (a) $ 0.75 $ 0.74 $ 0.73 $ 0.65 $ 0.80 Ratios (to average daily net assets): Expenses 0.59% 0.63% 0.62% 0.68% 0.68% Net investment income 3.48% 3.43% 3.33% 2.97% 3.55%
(a) Calculated using the average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Intermediate Tax Exempt Bond Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to provide a high level of interest income exempt from federal income taxes, while seeking preservation of shareholders' capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in tax exempt municipal securities issued by states, territories, and possessions of the United States, the District of Columbia and their political subdivisions, agencies and instrumentalities. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Tax-exempt bonds and notes are priced at market on the basis of valuations furnished by an independent pricing service or dealers, approved by the Trustees. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties, or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and then is valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of the trade date. Interest income is determined on the basis of coupon interest earned, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities and short-term securities with greater than sixty days to maturity. Dividend income is recorded on ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. C. Distributions to shareholders Distributions on shares of the Fund are declared daily from net investment income and distributed monthly. Distributions from capital gains, if any, are distributed annually by the Fund. Distributions from net investment income and capital gains, if any, are automatically reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Distributions are recorded on the ex-dividend date. Income and capital gains distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to differing treatments for capital loss carryovers. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 15 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Notes to Financial Statements -------------------------------------------------------------------------------- D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuer Affiliated issuers are investment companies advised by Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157") FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions with Affiliates: The investment advisory fee paid to Standish Mellon for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 0.40% of the Fund's average daily net assets. Standish Mellon voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and other extraordinary expenses) to 0.45% of the Fund's average daily net assets for the year ended September 30, 2007. Pursuant to this arrangement, for the year ended September 30, 2007, Standish Mellon voluntarily waived a portion of its investment advisory fee in the amount of $226,230. This arrangement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of Standish Mellon, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $10,606, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of Standish Mellon, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $122,378 for the year ended September 30, 2007. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $1,504 for the year ended September 30, 2007, which is included in miscellaneous expenses on the statement of operations. See Note 6 for further details. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,245, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of Standish or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. 16 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of Standish Mellon, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $4,841, which is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $18,458 for fees payable to BNY Mellon Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of Standish, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ----------- ----------- Non-U.S. Government Securities $85,987,797 $15,337,465 =========== ===========
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 5,034,122 2,339,293 Shares issued to shareholders in reinvestment of distributions 235,626 161,970 Shares redeemed (1,838,195) (1,638,284) ---------- ---------- Net increase (decrease) 3,431,553 (862,979) ========== ==========
At September 30, 2007, two shareholders of record held in the aggregate 84% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund received $1,133 in redemption fees which is reflected in the cost of shares redeemed. (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. 17 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Notes to Financial Statements -------------------------------------------------------------------------------- In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $ 197,997,187 ============= Gross unrealized appreciation $ 1,729,255 Gross unrealized depreciation (899,308) ------------- Net unrealized appreciation (depreciation) $ 829,947 ============= Undistributed ordinary income $ 74,464 Undistributed capital gains 4,915 ------------- Total distributable earnings $ 79,379 =============
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006 was as follows:
2007 2006 ---------- ---------- Tax-Exempt Income $5,751,629 $4,195,245 Ordinary income 2,834 3,375 ---------- ---------- Total Distributions $5,754,463 $4,198,620 ========== ==========
At September 30, 2007, the Fund, for federal income tax purposes, has capital loss carryovers which will reduce the Fund's taxable income arising from net realized gain on investment, if any, to the extent permitted by the Internal Revenue Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Such capital loss carryovers are as follows:
Capital Loss Carry Over Expiration Date ---------- --------------- $25,970 9/30/2013 $86,973 9/30/2014 $138,767 9/30/2015
It is uncertain whether the Fund will be able to realize the benefits of the losses before they expire. (6) Line of Credit: On behalf of the Fund, and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit.For the year ended September 30, 2007, the Fund had average borrowings outstanding of $533,000 for a total of twelve days and incurred $1,038 of interest expense, which is included in miscellaneous expenses on the statement of operations. At September 30, 2007, the Fund did not have an outstanding loan balance. 18 Mellon Institutional Funds Investment Trust Standish Mellon Intermediate Tax Exempt Bond Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of Standish Mellon Intermediate Tax Exempt Bond Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Standish Mellon Intermediate Tax Exempt Bond Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 19 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $2,900 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $2,900 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $2,900 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $3,019 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43 Interested Trustees * None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 20 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ---------------------------------------------------------------------------------------------------------------------------------- Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 21 MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6933AR0907 MELLON INSTITUTIONAL FUNDS Annual Report The Boston Company International Core Equity Fund ------------------------------------------------------------------------------- Year ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Management Discussion and Analysis ------------------------------------------------------------------------------- For the year ended September 30, 2007, The Boston Company International Core Equity Fund had a total return of 22.4% compared to a return of 24.9% for its benchmark, the MSCI EAFE Index. During this period, international stocks continued to post strong returns compared to their U.S. peers. Over the past five years, the MSCI EAFE Index has posted an annualized return of 23.6%, the MSCI Emerging Market Index return was up a remarkable 38.7%, while the S&P 500 return of 15.5% was well below such overseas markets. As the Fund's fiscal year came to a close, the U.S. sub-prime difficulties, which spread globally, were calming down as the U.S. Federal Reserve Board reduced interest rates. However, it is clear the problem has not gone away. Although the returns for the 12-month period ended September 30, 2007 were strong, events around the world caused equity markets to be volatile. In the fourth quarter of 2006, as oil and gas prices fell and interest rates were inching down, the market returns were very positive. In the first quarter of 2007, a crackdown by the Chinese government on local investors borrowing to buy securities in their equity market caused a few days in which global markets tumbled. While world-wide markets were strong in April and May , returns in June trailed as inflation concerns heightened and defaults were increasing. The MSCI EAFE return for the quarter was 2.2%, however performance over the quarter was volatile. The major issues centered on the U.S. sub-prime exposure, widening bond spreads and a lack of liquidity in the credit markets. The credit tightening triggered quantitative models to perform in a perverse fashion as stocks that were unattractive on many valuation measures were being purchased by some large hedge funds to cover their short positions, thus pushing up prices of these unattractive stocks. Faced with the prospect of economic fallout and under intense political and market pressure, central bankers were compelled to expand liquidity. The Federal Reserve Board cut rates by fifty basis points and the market rallied. The strong returns over the period were broad-based with all countries and sectors reporting positive returns. Finland was the best performing country with a 68% return while Japan was the laggard with a 7% return. The Materials sector was the best performing sector with a 56% return, as the growth in the emerging markets continues to fuel demand for materials as infrastructure expands. Healthcare was the weakest sector reporting a 4.6% return. Failures in tests, patent expirations and impeding lawsuits hurt the returns of global health care stocks. Stock selection for the Fund was mixed for the twelve-month period ended September 30, 2007. Stock selection in Japan, Finland and Belgium was very strong with each attributing more than fifty basis points in excess of the relative return. Stock selection in the UK was weak, as the economy was hit particularly hard with the concerns related to the sub-prime credit crisis. The Fund's stock selection in the U.K. underperformed by 5.5% the benchmark return of 22.4% and was responsible for negative eighty basis points to the relative return. 2 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Management Discussion and Analysis ------------------------------------------------------------------------------- From the sector perspective, financials had the largest negative effect on the portfolio, again reflecting sub-prime contagion. The financial portfolio holdings were well diversified with attractive valuations, however companies exposed to mortgage underwriting reported that there would be writeoffs and earnings would be negatively affected. Financials underperformed the benchmark index by 6%. The Industrial sector was the best performer with a 54.7% return as compared to the benchmark's return of 38.3%. A significant story during the third quarter of 2007 was the "quant blowup" caused by major hedge funds liquidating positions in mid-August. From August 8 through August 10, stocks that were rated highly in our models underperformed and those that ranked poorly outperformed. During this time,factors such as valuation and momentum which have been strong indicators of positive alpha had negative attribution to the relative return. This had a negative effect on the portfolio. Looking toward the future, while we believe that the sub-prime crisis has subsided, it is clear it has not gone away completely. Commodity prices remain firm with oil trading at an all time high of over $80a barrel. The threat of inflation is lurking, as U.S. GDP numbers are being lowered. That said, the reliance on the US for global growth is not as important as it has been in the past. The emerging markets and in particular the "BRIC"s (Brazil, Russia, India and China) continue to demand goods and services to address infrastructure needs. Europe is benefiting from intra regional exports and 40% of Japanese companies are trading below book value. Taken together, we believe that these facts support positive future returns. As always, we remain disciplined in our investment philosophy as we believe the best opportunity is through stock selection. The Fund will continue to seek to invest in stocks which combine better than peer-group business momentum and better than peer-group valuation characteristics. This is the time tested philosophy the Fund has followed since inception, and we believe this methodology will continue to produce attractive long-term results for shareholders. William S. Patzer Portfolio Manager The Boston Company Asset Management, LLC 3 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Comparison of Change in Value of $100,000 Investment in The Boston Company International Core Equity Fund and the MSCI EAFE Index (Unaudited) ------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED BY A LINE CHART IN THE PRINTED DOCUMENT.]
TBC International Core PERIOD Equity Fund MSCI EAFE Index* 9/30/97 100,000 100,000 12/31/97 90,603 92,169 3/31/98 110,089 105,728 6/30/98 113,969 106,850 9/30/98 97,076 91,662 12/31/98 112,826 110,600 3/31/99 110,472 112,139 6/30/99 114,198 114,989 9/30/99 117,713 120,035 12/31/99 132,965 140,423 3/31/00 131,790 140,276 6/30/00 132,328 134,718 9/30/00 126,039 123,851 12/31/00 126,629 120,528 3/31/01 116,138 104,007 6/30/01 121,584 102,920 9/30/01 106,623 88,511 12/31/01 111,345 94,684 3/31/02 114,873 95,604 6/30/02 119,051 93,148 9/30/02 99,403 74,766 12/31/02 104,134 79,591 3/31/03 99,206 73,054 6/30/03 116,684 87,130 9/30/03 127,473 94,212 12/31/03 148,635 110,302 3/31/04 158,464 115,088 6/30/04 159,122 115,335 9/30/04 161,938 115,015 12/31/04 185,932 132,635 3/31/05 188,813 132,415 6/30/05 188,380 131,081 9/30/05 212,360 144,682 12/31/05 218,461 150,588 3/31/06 241,403 164,736 6/30/06 242,863 165,890 9/30/06 252,575 172,405 12/31/06 283,059 190,253 3/31/07 291,570 198,008 6/30/07 310,281 210,688 9/30/07 309,072 215,273
Average Annual Total Returns (for period ended 9/30/2007)
Since Inception 1 Year 3 Years 5 Years 10 Years 12/8/1988 -------------------------------------------------------------------------------------------------------------------- Fund 22.37% 24.04% 25.47% 11.95% 9.05%
* Source: Lipper Inc. Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 4 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Shareholder Expense Example (Unaudited) ------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ------------------------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,046.30 $4.41 Hypothetical (5% return per year before expenses) $1,000.00 $1,020.76 $4.36
-------------- + Expenses are equal to the Fund's annualized expense ratio of 0.70%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 5 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Portfolio Information as of September 30, 2007 (Unaudited) -------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Country Sector Investments ---------------------------------------------------------------------------------------------------------- Nestle SA Switzerland Consumer Staples 2.1% Royal Dutch Shell PLC United Kingdom Energy 1.9 BHP Billiton Ltd. Australia Materials 1.7 ING Groep NV CVA Netherlands Financials 1.7 Xstrata PLC United Kingdom Materials 1.6 HBOS PLC United Kingdom Financials 1.6 Toyota Motor Corp. Japan Consumer Discretionary 1.5 Komatsu Ltd. Japan Industrials 1.5 Royal Bank of Scotland Group PLC United Kingdom Financials 1.5 E On AG Germany Utilities 1.5 ------ 16.6%
* Excludes short-term securities.
Percentage of Geographic Region Allocation* Investments --------------------------------------------------------------- Europe ex U.K 52.3% United Kingdom 20.9 Asia ex Japan 6.7 Japan 20.1 ----- 100.0%
* Excludes short-term securities. 6 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Schedule of Investments--September 30, 2007 -------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------ UNAFFILIATED INVESTMENTS--90.7% Common Equities--88.5% Australia--4.5% AMP Ltd. 678,530 6,346,424 ASX Ltd. 210,300 10,030,837 BHP Billiton Ltd. 497,600 19,671,954 Coca-Cola Amatil Ltd. 549,690 4,390,154 Commonwealth Bank of Australia 257,400 12,880,421 Seven Network Ltd. 325,400 3,782,756 57,102,546 Austria--0.6% OMV AG 55,800 3,726,301 Voestalpine AG 46,800 4,044,250 7,770,551 Belgium--2.6% Delhaize Group 75,270 7,212,913 InBev NV 184,400 16,713,382 KBC Groep NV 59,200 8,144,764 32,071,059 Denmark--1.2% Carlsberg AS 47,100 6,435,756 Danske Bank AS 204,800 8,318,751 14,754,507 Finland--2.9% KCI Konecranes Oyj 145,900 5,869,186 Metso Corp. 56,900 3,919,033 Neste Oil Oyj 98,600 3,609,294 Nokia Oyj 402,800 15,313,312 Rautaruukki Oyj 127,900 7,749,556 36,460,381 France--8.8% Air France-KLM 95,400 3,505,761 BNP Paribas 149,200 16,327,141 Bouygues SA 123,270 10,633,115 Cap Gemini SA 92,550 5,704,016 Lafarge SA 20,040 3,104,895 Sanofi-Aventis SA 123,200 10,432,068 Scor SE 139,550 3,739,178 Societe Generale 61,560 10,330,487 Suez SA 133,000 7,832,875 Total SA 158,620 12,897,475 Vinci SA 129,400 10,110,092 Vivendi SA 377,700 15,942,566 110,559,669
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Schedule of Investments--September 30, 2007 -------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------- Germany--6.5% BASF AG 63,780 8,822,177 Bayerische Motoren Werke AG 83,900 5,411,381 Deutsche Bank AG 88,900 11,457,599 E On AG 90,570 16,745,955 MAN AG 62,100 9,036,997 Merck KGaA 39,200 4,729,072 MTU Aero Engines Holding AG 63,300 3,854,350 Salzgitter AG 16,270 3,195,709 Siemens AG 49,680 6,830,748 Thyssenkrupp AG 182,500 11,622,542 81,706,530 Greece--0.7% Coca-Cola Hellenic Bottling Co. S.A 96,800 5,590,490 National Bank of Greece S.A 56,500 3,601,434 9,191,924 Hong Kong--0.7% Esprit Holdings Ltd. 203,300 3,230,763 The Wharf(Holdings) Ltd. 1,223,500 6,014,064 9,244,827 Ireland--1.2% Allied Irish Banks PLC (AIB) 327,300 7,934,407 CRH PLC 193,800 7,696,593 15,631,000 Italy--3.0% Banca Popolare di Milano Scarl (BPM) 191,900 2,835,008 Enel Spa 869,980 9,850,296 Eni Spa 380,900 14,116,817 Fiat Spa 114,500 3,463,105 Prysmian Spa 120,820 (a) 3,444,064 UniCredito Italiano Spa 451,900 3,866,456 37,575,746 Japan--18.1% Aisin Seiki Co Ltd. 99,800 3,987,830 Canon, Inc. 9,350 510,355 KDDI Corp. 1,116 8,277,461 Kenedix, Inc. 4,566 7,949,856 Komatsu Ltd. 508,100 17,073,788 Makita Corp. 182,800 8,020,475 Marubeni 566,800 5,200,724 Mitsubishi Corp. 219,300 6,949,177 Mitsubishi UFJ Lease & Finance Co. 109,630 3,636,200 Mitsui & Co., Ltd. 487,800 11,847,845
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Schedule of Investments--September 30, 2007 -------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------- Japan (continued) Mitsui OSK Lines Ltd. 565,400 9,160,002 NEC Electronics Corp. 126,400 (a) 3,631,235 Nikon Corp. 295,300 10,154,392 Nintendo Co., Ltd. 25,300 13,170,889 Nippon Steel Corp. 844,500 6,079,929 NTT Corp. 1,158 5,413,476 Olympus Corp. 145,300 5,970,367 Seven & I Holdings Co., Ltd. 159,400 4,100,522 Sony Corp. 223,900 10,856,821 Sumco Corp. 181,000 7,374,249 Sumitomo Electric Industries 237,500 3,783,625 Sumitomo Metal Industries Ltd. 1,882,600 10,980,604 Sumitomo Trust & Banking Co., Ltd. 864,200 6,537,737 Takeda Pharmaceutical Co., Ltd. 176,500 12,415,078 TDK Corp. 66,800 5,861,792 The Chiba Bank Ltd. 753,000 5,821,050 Tokyo Electron Ltd. 72,500 4,594,759 Toyo Suisan Kaisha Ltd. 194,200 3,651,711 Toyota Motor Corp. 293,600 17,329,224 Urban Corp. 473,300 7,676,137 228,017,310 Netherlands--3.6% ASML Holding NV 229,600 (a) 7,612,273 Fugro NV 63,300 5,138,832 ING Groep NV CVA 435,200 19,319,129 Koninklijke DSM NV 133,200 7,189,350 Royal KPN NV 317,000 5,501,351 44,760,935 Norway--1.2% DnB NOR ASA 331,500 5,081,849 Orkla ASA 533,400 9,521,645 14,603,494 Singapore--0.7% DBS Group Holdings Ltd. 648,300 9,429,183 Spain--3.3% ACS Actividades 169,400 9,348,542 Banco Santander SA 449,000 8,726,935 Mapfre SA 611,300 2,763,333 Repsol YPF SA 148,400 5,301,041 Telefonica SA 446,600 12,501,397 Union Fenosa SA 57,100 3,378,307 42,019,555
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Schedule of Investments--September 30, 2007 -------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------ Sweden--2.5% Nordea Bank AB 463,000 8,073,617 Sandvik AB 286,800 6,156,752 Skandinaviska Enskilda Banken AB 372,900 12,130,642 Svenska Cellulosa AB (SCA), Class B 263,200 4,914,489 31,275,500 Switzerland--7.4% Baloise Holdings AG 50,810 5,143,437 Credit Suisse Group 219,300 14,567,234 Nestle SA 53,203 23,910,947 Roche Holding AG 80,240 14,555,868 Swiss Reinsurance 138,710 12,360,769 The Swatch Group AG 28,060 9,211,068 Zurich Financial Services AG 45,690 13,712,497 93,461,820 United Kingdom--19.0% Aviva PLC 432,170 6,506,586 BAE Systems PLC 416,000 4,199,535 Barclays PLC 689,790 8,402,710 Barratt Developments PLC 225,990 3,457,893 BP PLC 1,120,100 13,002,994 British Airways PLC 1,095,700 (a) 8,590,027 BT Group PLC 1,662,600 10,441,115 Charter PLC 256,160 (a) 6,198,931 Dairy Crest Group PLC 253,600 3,263,027 Enterprise Inns PLC 446,400 5,405,883 Firstgroup PLC 266,600 3,754,783 GKN PLC 624,700 4,523,718 Greene King PLC 345,100 6,226,360 HBOS PLC 945,200 17,681,868 International Power PLC 1,792,100 16,542,467 National Grid PLC 732,800 11,752,283 Next PLC 85,450 3,433,004 Prudential PLC 241,200 3,707,891 Reckitt Benckiser PLC 105,300 6,186,336 Royal Bank of Scotland Group PLC 1,583,655 17,007,505
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Schedule of Investments--September 30, 2007 -------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ---------------------------------------------------------------------------------------------- United Kingdom (continued) Royal Dutch Shell PLC 66,900 2,760,277 Royal Dutch Shell PLC 527,500 21,710,566 SabMiller PLC 277,800 7,910,286 Shire PLC 169,600 4,166,674 SSL International PLC 395,800 3,441,006 Tesco PLC 429,830 3,862,151 Vodafone Group PLC 3,189,937 11,517,217 WPP Group PLC 250,870 3,397,249 Xstrata PLC 278,700 18,494,327 237,544,669 Total Common Equities (Cost $996,182,909) 1,113,181,206
PREFERRED STOCKS--1.8% Germany Fresenius SE 154,680 12,036,706 Porsche AG 4,888 10,383,847 Total Preferred Stocks (Cost $16,689,215) 22,420,553
SHORT-TERM INVESTMENTS--0.4% Rate Maturity Par Value ------ --------- ---------- U.S. Government--0.4% U.S. Treasury Bill 3.90% 12/13/2007 4,800,000 (b,c) 4,761,000 (Cost $4,761,000) TOTAL UNAFFILIATED INVESTMENTS (Cost $1,017,633,124) 1,140,362,759
AFFILIATED INVESTMENTS--5.8% Shares -------- Dreyfus Institutional Preferred Plus Money Market 73,360,303 (d) 73,360,303 ------------- Fund (Cost $73,360,303) TOTAL INVESTMENTS--96.5% (Cost $1,090,993,427) 1,213,723,062 OTHER ASSETS, LESS LIABILITIES--3.5% 43,654,716 ------------- NET ASSETS--100% 1,257,377,778 =============
Notes to Schedule of Investments: a Non-income producing security. b Denotes all or part of security segregated as collateral for futures transactions. c Rate noted is yield to maturity. d Affiliated institutional money market fund. The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Schedule of Investments--September 30, 2007 ------------------------------------------------------------------------------- At September 30, 2007, the Fund held the following forward foreign currency exchange contracts:
Local Unrealized Principal Contract Value at USD Amount Appreciation Contracts to Deliver Amount Value Date September 30, 2007 to Receive (Depreciation) ----------------------------------------------------------------------------------------------------------------------------------- Australian Dollar 1,770,002 10/2/2007 $ 1,570,700 $ 1,568,955 $ (1,745) British Pound 4,227,964 10/1/2007 8,648,724 8,562,473 (86,251) British Pound 8,470,625 10/2/2007 17,327,510 17,269,910 (57,600) Swiss Franc 3,937,163 10/1/2007 3,383,314 3,362,223 (21,091) Swiss Franc 7,248,353 10/2/2007 6,228,713 6,203,657 (25,056) Danish Krone 3,189,165 10/1/2007 610,320 605,707 (4,613) Danish Krone 17,379,312 10/2/2007 3,325,930 3,316,093 (9,837) Euro 11,242,575 10/1/2007 16,031,912 15,925,108 (106,804) Euro 14,068,749 10/2/2007 20,062,036 20,004,354 (57,682) Japanese Yen 1,017,641,970 10/1/2007 8,859,075 8,796,283 ( 62,792) Japanese Yen 1,569,663,691 10/2/2007 13,664,697 13,653,999 (10,698) Norwegian Krone 2,840,296 10/1/2007 526,497 519,031 (7,466) Norwegian Krone 4,966,857 10/2/2007 920,692 915,280 (5,412) Singapore Dollar 480,927 10/1/2007 323,835 322,748 (1,087) Singapore Dollar 818,166 10/2/2007 550,916 551,585 669 Swedish Krona 8,475,367 10/1/2007 1,316,030 1,300,042 (15,988) Swedish Krona 57,161,643 10/2/2007 8,875,894 8,833,510 (42,384) --------- $(515,837) =========
At September 30, 2007 the Fund held the following futures contracts:
Unrealized Underlying Face Appreciation Contract Position Expiration Date Amount at Value (Depreciation) ----------------------------------------------------------------------------------------------------------------------------------- MSCI Pan-Euro (2702 Contracts) Long 12/18/2007 $98,406,948 $ (73,006) TOPIX (243 Contracts) Long 12/31/2007 34,354,662 1,316,593 ---------- $1,243,587 ==========
Percentage of Economic Sector Allocation Net Assets ------------------------------------------------------------- Consumer Discretionary 10.2% Consumer Staples 8.2 Energy 6.5 Financials 24.5 Health Care 5.4 Industrials 11.0 Information Technology 5.1 Materials 9.0 Telecommunications Services 5.1 Utilities 5.3 Short-term and Net other assets 9.7 ----- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. The accompanying notes are an integral part of the financial statements. 12
Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Statement of Assets and Liabilities September 30, 2007 ----------------------------------------------------------------------------------------------------------------------------- Assets Investments in securities: Unaffiliated issuers, at value (Note 1 A) (cost $1,017,633,124) $1,140,362,759 Affiliated issuers, at value (Note 1 A) (cost $73,360,303) 73,360,303 Cash 1,575,000 Foreign Currency, at value (cost $17,662,960) 17,906,688 Receivable for investments sold 131,872,289 Interest and dividends receivable 6,869,293 Receivable for Fund shares sold 1,381,422 Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 669 Prepaid expenses 173,299 -------------- Total assets 1,373,501,722 Liabilities Payable for Fund shares redeemed $ 91,157,229 Payable for investments purchased 23,301,739 Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 516,506 Payable for variation margin on open futures contracts (Note 6) 67,334 Accrued administrative service fees (Note 2) 594,507 Accrued accounting, administration, custody and transfer agent fees (Note 2) 378,097 Accrued professional fees 75,347 Accrued trustees' fees (Note 2) 29,561 Accrued chief compliance officer fee (Note 2) 388 Other accrued expenses and liabilities 3,236 -------------- Total liabilities 116,123,944 -------------- Net Assets $1,257,377,778 ============== Net Assets consist of: Paid-in capital $ 914,640,766 Accumulated net realized gain 217,253,773 Undistributed net investment income 500,969 Net unrealized appreciation 124,982,270 -------------- Total Net Assets $1,257,377,778 ============== Shares of beneficial interest outstanding 27,314,211 ============== Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 46.03 ==============
The accompanying notes are an integral part of the financial statements. 13
Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Statement of Operations For the Year Ended September 30, 2007 ----------------------------------------------------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from affiliated investments (Note 1H) $ 29,653 Dividend income from unaffiliated investments (net of foreign withholding taxes 1,317,978 $32,436) Interest income 4,641 Allocated investment income from portfolio (Note 9) 63,606,214 Allocated expenses from portfolio (Note 9) (17,664,258) -------------- Net investment income 47,294,228 Expenses Investment advisory fee (Note 2) $ 307,355 Accounting, administration, custody and transfer agent fees (Note 2) 151,337 Administrative service fees (Note 2) 1,009,252 Registration fees 241,933 Trustees' fees (Note 2) 6,061 Professional fees 143,065 Insurance expense 5,481 Miscellaneous expenses 177,772 -------------- Total expenses 2,042,256 Deduct: Waiver of investment advisory fee (Note 2) (92,386) -------------- Net expenses 1,949,870 -------------- Net investment income 45,344,358 -------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 35,875,585 Financial futures transactions 194,213 Foreign currency transactions and forward currency exchange transactions 291,995 Allocation of realized gain (loss) from portfolio (Note 9) 367,314,195 -------------- Net realized gain (loss) 403,675,988 Change in unrealized appreciation (depreciation) on: Investments (2,159,019) Financial futures contracts 650,870 Foreign currency translations and forward foreign currency exchange contracts 788,064 Allocation of unrealized depreciation from portfolio (Note 9) (28,029,393) -------------- Net change in net unrealized appreciation (depreciation) (28,749,478) -------------- Net realized and unrealized gain (loss) on investments 374,926,510 -------------- Net Increase in Net Assets from Operations $420,270,868 ==============
The accompanying notes are an integral part of the financial statements. 14
Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Statement of Changes in Net Assets ----------------------------------------------------------------------------------------------------------------------------- For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 45,344,358 $ 21,200,780 Net realized gain (loss) 403,675,988 38,731,387 Change in net unrealized appreciation (depreciation) (28,749,478) 123,661,754 ----------------- ----------------- Net increase (decrease) in net assets from investment operations 420,270,868 183,593,921 Distributions to Shareholders (Note 1C) From net investment income (37,760,225) (15,633,628) From net realized gains on investments (55,518,833) (17,704,234) ----------------- ----------------- Total distributions to shareholders (93,279,058) (33,337,862) ----------------- ----------------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 777,178,564 1,655,730,693 Value of shares issued in reinvestment of distributions 52,326,222 16,673,962 Cost of shares redeemed (net of redemption fees of $75,412 and $47,195, respectively) (1,914,206,731) (94,637,359) ----------------- ----------------- Net increase (decrease) in net assets from Fund share transactions (1,084,701,945) 1,577,767,296 ----------------- ----------------- Total Increase (Decrease) in Net Assets (757,710,135) 1,728,023,355 Net Assets At beginning of year 2,015,087,913 287,064,558 ----------------- ----------------- At end of year (including undistributed net investment income of $500,969 and $6,180,167, respectively) $ 1,257,377,778 $ 2,015,087,913 ================= =================
The accompanying notes are an integral part of the financial statements. 15 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, --------------------------------------------------------------- 2007 2006 2005 2004 2003 --------- ---------- --------- --------- --------- Net Asset Value, Beginning of Year $ 39.01 $ 34.34 $ 27.03 $ 21.62 $ 17.10 --------- ---------- --------- --------- --------- From Investment Operations: Net investment income (loss)* (a) 0.78 0.71 0.50 0.31 0.23 Net realized and unrealized gain (loss) on investments 7.82 5.59 7.73 5.49 4.55 --------- ---------- --------- --------- --------- Total from operations 8.60 6.30 8.23 5.80 4.78 --------- ---------- --------- --------- --------- Less Distributions to Shareholders: From net investment income (0.60) (0.40) (0.39) (0.39) (0.26) From net realized gains on investments (0.98) (1.23) (0.53) -- -- --------- ---------- --------- --------- --------- Total distributions to shareholders (1.58) (1.63) (0.92) (0.39) (0.26) --------- ---------- --------- --------- --------- Net Asset Value, End of Year $ 46.03 $ 39.01 $ 34.34 $ 27.03 $ 21.62 ========= ========== ========= ========= ========= Total Return 22.37%(b) 19.01% 31.06% 27.04% 28.23%(b) Ratios/Supplemental data: Expenses (to average daily net assets)* (c) 0.77% 0.88% 1.01% 1.12% 1.16% Net Investment Income (to average daily net assets)* 1.78% 1.91% 1.59% 1.22% 1.21% Portfolio Turnover (d) 83% 51% 58% 80% 17% Net Assets, End of Year (000's omitted) $1,257,378 $2,015,088 $287,065 $124,675 $ 77,727
--------------
* The investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios without waivers and reimbursement would have been: Net investment income per share (a) $ 0.78 N/A N/A N/A $ 0.19 Ratios (to average daily net assets): Expenses (c) 0.78% N/A N/A N/A 1.34% Net investment income 1.77% N/A N/A N/A 1.03%
(a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) For the period October 1, 2006 to September 19, 2007 and for the fiscal years ended September 30, 2003-2006, the ratio includes the Fund's share of the TBC International Core Equity Portfolio's allocated expenses. d) On September 19, 2007, the Fund, which had owned approximately 100% of the Portfolio on such date, withdrew entirely from the Portfolio and received the Portfolio's securities and cash in exchange for its interests in the Portfolio. Effective September 20, 2007, the Fund began investing directly in the securities in which the Portfolio had invested. Portfolio turnover represents investment activity of both the Fund and the Portfolio for the year. The amounts shown for 2003-2006 are the ratios for the Portfolio. The accompanying notes are an integral part of the financial statements. 16 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Notes to Financial Statements ------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company International Core Equity Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of companies that are represented in the MSCI Europe, Australia, Far East (EAFE) Index and Canada. The Fund may invest up to 25% of assets in emerging market countries. The Fund may also invest in equity index futures contracts based primarily on the indices of countries included in the EAFE Index and Canada. Prior to September 20, 2007, the Fund had invested substantially all of its investable assets in The Boston Company International Core Equity Portfolio (the "Portfolio"), a subtrust of the Mellon Institutional Funds Master Portfolio, the "Portfolio Trust", a New York trust. The Portfolio had investment objectives, policies, limitations and accounting policies substantially identical to those of the Fund. While investing in the Portfolio, the Fund earned its proportionate share of the Portfolio's income, expenses, and realized and unrealized gains and losses based on its percentage ownership of the Portfolio's shares of beneficial interest. The Portfolio's Statement of Operations for the period October 1, 2006 through September 19, 2007 is included in Note 9. On September 19, 2007, the Fund, which owned 100% of the Portfolio on that date, withdrew entirely from the Portfolio and received the Portfolio's assets, including securities and cash, and assumed the Portfolio's stated liabilities in exchange for its interest in the Portfolio. Effective September 20, 2007, the Fund began investing directly in the securities in which the Portfolio had invested. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") is calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Because foreign markets may be open at different times than the NYSE, the value of the Fund's shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect the events that occur after such close but before the close of the NYSE. If market quotations are not readily available or do not accurately reflect fair value, or the value of a security has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), the Fund may value its assets by a method the Trustees believe accurately reflects the fair value. The Trustees have adopted fair value pricing procedures, which, among other things, require the Fund to fair value such securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised by the Trustees from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices for foreign securities will be used by the Fund to a significant extent. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. 17 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Notes to Financial Statements ------------------------------------------------------------------------------- B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Dividends representing a return of capital are reflected as a reduction of cost. Realized gains and losses from securities sold are recorded on the identified cost basis. Income, expenses and realized and unrealized gains and losses allocated from the Portfolio represent the Fund's proportionate share of those items earned by the Portfolio during the period October 1, 2006 through September 19, 2007. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to differing treatments for foreign currency transactions and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. Section 988 of the Internal Revenue Code ("Code") provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. On July 31, 2007, the Dreyfus Premier International Equity Fund ("Dreyfus Feeder") withdrew from the master feeder structure via a redemption-in-kind and received currency and securities with unrealized appreciation of $57,244,763 for the value of their interest in the Portfolio. The Fund realized no gain on this transaction. $40,597,582 of unrealized appreciation had been allocated to that feeder fund. The Fund increased paid in capital and decreased unrealized appreciation on investments by $16,647,181 to recognize this difference. This reclassification had no impact on the net assets or results of operations of the Fund. D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Foreign currency transactions The Fund maintains its books and records in U.S. dollars. Investment security valuations and other assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. F. Foreign investment risk There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. 18 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Notes to Financial Statements ------------------------------------------------------------------------------- G. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. H. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC. ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. I. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: Prior to September 20, 2007 the Fund did not directly incur any investment advisory, custody, administration and commitment fees, which were incurred by the Portfolio and allocated to the Fund based on its proportionate interest in the Portfolio. The following disclosures relating to these fees represent fees incurred by the Portfolio for the period prior to September 20, 2007, and by the Fund thereafter. The investment advisory fee paid to TBCAM for overall investment advisory, and administrative services, and general office facilities, is paid monthly at the annual rate of 0.80% of the first $500 million of the Fund's, and previously the Portfolio's, average daily net assets, 0.75% of the next $500 million, and 0.70% of the next $500 million, 0.60% of the next $500 million, and 0.50% on assets over $2 billion. For the period of September 1, 2007 through August 31, 2008, TBCAM has agreed to rebate 0.25% of its management fee to the Fund. This rebate will end on September 1, 2008, and on such date the Fund's contractual advisory fee will again be in effect. This rebate will not change any existing voluntary total expense limitation arrangements that are in effect, as TBCAM will continue its commitment to maintain such total expense limitations during this rebate period. For the period October 1, 2006 through September 19, 2007, TBCAM rebated $125,843 of its investment advisory fees charged to the Portfolio. For the period September 20, 2007 through September 30, 2007, TBCAM rebated $92,386 of its investment advisory fees charged to the Fund. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $107,940, for the year ended September 30, 2007. The Trust, and previously the Portfolio Trust, entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Portfolio/Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $1,401,006 for the period October 1, 2006 to September 19, 2007 and $43,397 for the period September 20, 2007 to September 30, 2007. The Trust, and previously the Portfolio Trust, also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Portfolio/Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, the Fund was charged $47 for the period October 1, 2006 to September 19, 2007 and $0 for the period September 20, 2007 to September 30, 2007. See Note 7 for further details. 19 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Notes to Financial Statements ------------------------------------------------------------------------------- The Trust, and previously the Portfolio Trust, entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $14,389 for the period October 1, 2006 to September 19, 2007 and the fund was charged $370 for the period September 20, 2007 to September 30, 2007, which is included in miscellaneous expenses on the statement of operations. See Note 8 for further details. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,241, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $37,930, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $156,191 payable to BNY Mellon Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales -------------- --------------- Non-U.S. Government Securities $2,160,460,433 $3,557,056,412 ============== ===============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 -------------------- -------------------- Shares sold 18,088,840 45,334,340 Shares issued to shareholders in reinvestment of distributions 1,212,198 479,216 Shares redeemed (43,638,985) (2,520,245) ----------- ---------- Net increase (decrease) (24,337,947) 43,293,311 =========== ==========
At September 30, 2007, one shareholder of record held approximately 23.5% of the total outstanding shares of the Fund. Investment activities of this shareholder could have a material impact on the Fund. 20 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Notes to Financial Statements ------------------------------------------------------------------------------- The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund received $75,412 in redemption fees and is reflected in the cost of shares redeemed. (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $1,096,857,918 ============== Gross unrealized appreciation $ 173,086,322 Gross unrealized depreciation (36,820,393) -------------- Net unrealized appreciation (depreciation) $ 136,265,929 ============== Undistributed ordinary income $ 0 Undistributed capital gains 223,118,045 -------------- Total distributable earnings $ 223,118,045 ==============
The tax character of distributions paid during the fiscal year ended September 30, 2007 were as follows:
2007 2006 ----------- ----------- Ordinary income $55,585,861 $19,748,254 Capital gains 37,693,197 13,589,608 ----------- ----------- Total distributions $93,279,058 $33,337,862 =========== ===========
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Futures contracts The Fund, and previously the portfolio, may enter into financial futures contracts for the purchase or sale of securities, or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized appreciation or depreciation by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to 21 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Notes to Financial Statements ------------------------------------------------------------------------------- increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may also arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Fund enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At September 30, 2007, the Fund held open financial futures contracts. See the Schedule of Investments for further details. Forward Foreign Currency Exchange Contracts The Fund, and previously the Portfolio, may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any appreciation or depreciation are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At September 30, 2007, the Fund held forward foreign currency exchange contracts. See Schedule of Investments for further details. (7) Security Lending: The Fund, and previously the Portfolio, may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund, and previously the Portfolio, loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $392 of which $346 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund did not have securities out on loan. (8) Line of Credit: On behalf of the Fund, and other funds in the Trust, and previously the portfolios in the Portfolio Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund and the Portfolio had average borrowings outstanding of $14,676,875 for a total of eight days and incurred $4,997 for the period October 1, 2006 to September 19, 2007 and $13,135 for the period September 20, 2007 to September 30, 2007, of interest expense. At September 30, 2007, the Fund did not have a loan balance outstanding. 22 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Notes to Financial Statements ------------------------------------------------------------------------------- (9) Reorganization: Prior to September 19, 2007, the Fund had utilized a Master Feeder Fund structure where the Fund sought to achieve its investment objectives by investing all of its investable assets in the Boston Company International Core Equity Portfolio. Effective after the close of business on September 19, 2007, the Fund withdrew its assets from the Portfolio by means of a redemption-in-kind and now the Fund invests directly in portfolio securities. Below is the Statement of Operations for The Boston Company International Core Equity Portfolio for the period from October 1, 2006 to September 19, 2007:
Investment Income (Note 1B) Dividend income from unaffiliated investments (net foreign withholding taxes $7,416,799) $ 67,122,282 Dividend income from affiliated investments 2,254,837 Interest income 934,626 Security lending income (Note 7) 47 ------------ Net investment income 70,311,792 Expenses Investment advisory fee (Note 2 ) $ 18,023,988 Accounting, administration and custody fees (Note 2) 1,401,006 Trustees' fees (Note 2) 121,522 Professional fees 3,167 Insurance expense 37,330 Miscellaneous expenses 22,223 ------------- Total expenses 19,609,236 Deduct: Waiver of investment advisory fee (Note 2) (125,843) ------------ Net expenses 19,483,393 ------------ Net investment income 50,828,399 ------------ Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 391,895,359 Financial futures contracts (11,541,383) Foreign currency transactions and forward currency exchange contracts 3,487,769 ------------ Net realized gain (loss) 383,841,745 Change in unrealized appreciation (depreciation) on: Investments (56,724,418) Financial futures contracts 173,579 Foreign currency translations and forward currency exchange contracts 444,213 ------------ Net change in unrealized appreciation (depreciation) (56,106,626) ------------ Net realized and unrealized gain (loss) on investments 327,735,119 ------------ Net Increase in Net Assets from Operations $378,563,518 ============
The accompanying notes are an integral part of the financial statements. 23 Mellon Institutional Funds Investment Trust The Boston Company International Core Equity Fund Report of Independent Registered Public Accounting Firm ------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Trust and Shareholders of The Boston Company International Core Equity Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company International Core Equity Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 24 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ----------------------------------------------------------------------------------------------------------------------------------- Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $500 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $12,214 Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $500 c/o Harvard University 9/13/1989 Professor of Political Portfolio: $12,214 Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $500 P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $12,214 New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $500 c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $14,346 P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* *Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 25 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ----------------------------------------------------------------------------------------------------------------------------------- Barbara A. McCann (46)* President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56)** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management BNY Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Optima L/S One Boston Place Officer Strategy Fund, LLC; formerly Director, Blackrock, Boston, MA 02108 Inc.,Senior Vice President, State Street Research & 4/8/57 ManagementCompany ("SSRM"), and Vice President,SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. **Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 26 THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6924AR0907 MELLON INSTITUTIONAL FUNDS Annual Report The Boston Company International Small Cap Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Management Discussion and Analysis -------------------------------------------------------------------------------- For the year ended September 30, 2007, The Boston Company International Small Cap Fund had a total return of 24.5% compared to a return of 26.8% for its benchmark, the S&P Citigroup World EMI ex-US Index. During this period, international stocks continued to post strong returns compared to their U.S. peers. Over the past five years, the S&P Citigroup World EMI ex-US Index has posted an annualized return of 29.6%, while the MSCI EAFE Index and the MSCI Emerging Market Index were up 23.6% and 38.7%, respectively. Meanwhile, the S&P 500 returned 15.5%, which was well below the overseas markets. As the Fund's fiscal year came to a close, the U.S. sub-prime difficulties which spread globally were calming down as the U.S. Federal Reserve Board reduced interest rates. However, it is clear the problem has not gone away. Although the returns for the 12-month period ended September 30, 2007 were strong, events around the world caused equity markets to be volatile. In the fourth quarter of 2006, as oil and gas prices fell and interest rates were inching down, the market returns were very positive. In the first quarter of 2007, a crackdown by the Chinese government on local investors borrowing to buy securities in their equity market caused a few days in which global markets tumbled. While worldwide markets were strong in April and May, returns in June trailed as inflation concerns heightened and defaults were increasing. The S&P Citigroup World EMI ex-US Index returned -0.4% this past quarter, yet performance over the quarter was volatile. The major issues centered on the U.S. sub-prime exposure, widening bond spreads and a lack of liquidity in the credit markets. The credit tightening triggered quantitative models to perform in a perverse fashion as stocks that were unattractive on many valuation measures were being purchased by some large hedge funds to cover their short positions, thus pushing up prices of these unattractive stocks. Faced with the prospect of economic fallout and under intense political and market pressure, central bankers were compelled to expand liquidity. The Federal Reserve Board cut rates by fifty basis points and the market rallied. The strong returns over the period were broad-based with all countries except one and all sectors reporting positive returns. South Korea and Slovenia were the best performing countries with returns of 78.7% and 173%, respectively. Japan, the only country with a negative return, was the weakest market in the benchmark with a -1.9% return. The Materials sector was the best performing sector with a 47% return, as growth in the emerging markets continues to fuel demand for materials as infrastructure expands. Information Technology was the weakest sector in the benchmark reporting a 16% return. Stock selection for the Fund was mixed for the twelve month period ended September 30, 2007. Stock selection in both Switzerland and Finland was very strong. The Fund's stock selection in Switzerland, with a 51% return, outperformed the benchmark return of 32% by 19%. The Fund's stock selection in Finland, with an 83% return, outperformed the benchmark return of 51% by 32%. Stock selection in the UK was weak, as the country was hit particularly hard with concerns related to the sub-prime credit crisis. The Fund's stock selection in the UK underperformed by 4.7% the benchmark return of 18.8% and was responsible for negative eighty basis points to the relative return. Japan stock selection was also weak contributing a negative forty-seven basis points to the return. 2 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Management Discussion and Analysis -------------------------------------------------------------------------------- From the sector perspective, financials had the largest negative effect on the portfolio, again reflecting sub-prime contagion. The financial portfolio holdings were well diversified with attractive valuations, however companies exposed to mortgage underwriting reported that there would be writeoffs and earnings would be negatively affected. Financials underperformed the benchmark index by 5%. The Materials sector was the best performer with a 53.8% return as compared to the benchmark's return of 46.9%. A significant story during the third quarter of 2007 was the "quant blowup" caused by major hedge funds liquidating positions in mid-August. From August 8 through August 10, stocks that were rated highly in our models underperformed and those that ranked poorly outperformed. During this time, factors such as valuation and momentum which have been strong indicators of positive alpha had negative attribution to the relative return. This had a negative effect on the portfolio. Looking toward the future, while we believe that the sub-prime crisis has subsided, it is clear it has not gone away completely. Commodity prices remain firm with oil trading at an all time high of over $80 a barrel. The threat of inflation is lurking, as U.S. GDP numbers are being lowered. That said, the reliance on the US for global growth is not as important as it has been in the past. The emerging markets and in particular the "BRIC"s (Brazil, Russia, India and China) continue to demand goods and services to address infrastructure needs. Europe is benefiting from intraregional exports and 40% of Japanese companies are trading below book value. Taken together, we believe that these facts support positive future returns. As always, we remain disciplined in our investment philosophy as we believe the best opportunity is through stock selection. The Fund will continue to seek to invest in stocks which combine better than peer-group business momentum and better than peer-group valuation characteristics. This is the time tested philosophy the Fund has followed since inception, and we believe this methodology will continue to produce attractive long-term results for shareholders. William S. Patzer, CFA Portfolio Manager The Boston Company Asset Management, LLC 3 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Comparison of Change in Value of $100,000 Investment in The Boston Company International Small Cap Fund and the S&P/CitiGroup EMI ex-US Index (Unaudited) -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS REPRESENTED IN THE PRINTED MATERIAL AS A LINE CHART]
TBC PERIOD International Small Cap Fund* S&P/CitiGroup EMI ex-US Index** 9/30/97 100,000 100,000 12/31/97 86,676 89,727 3/31/98 105,476 105,167 6/30/98 107,599 104,791 9/30/98 85,145 88,920 12/31/98 95,417 100,629 3/31/99 104,297 102,072 6/30/99 119,189 108,349 9/30/99 131,512 113,873 12/31/99 134,667 124,282 3/31/00 142,049 126,797 6/30/00 146,573 124,578 9/30/00 142,297 118,017 12/31/00 140,148 111,450 3/31/01 126,928 99,575 6/30/01 135,983 102,602 9/30/01 117,917 86,792 12/31/01 126,589 93,951 3/31/02 135,750 99,599 6/30/02 145,755 101,597 9/30/02 124,275 83,697 12/31/02 128,190 87,107 3/31/03 124,828 83,093 6/30/03 149,623 102,380 9/30/03 169,751 115,853 12/31/03 196,861 133,907 3/31/04 219,363 146,516 6/30/04 222,907 147,793 9/30/04 226,173 147,891 12/31/04 262,234 172,395 3/31/05 275,262 178,844 6/30/05 277,835 177,802 9/30/05 317,091 197,386 12/31/05 341,702 210,482 3/31/06 390,053 235,991 6/30/06 385,452 233,697 9/30/06 392,309 241,738 12/31/06 446,257 272,407 3/31/07 465,161 290,603 6/30/07 491,171 307,738 9/30/07 488,429 306,567
Average Annual Total Returns (for period ended 9/30/2007) --------------------------------------------------------------------------------
Since Inception 1 Year 3 Years 5 Years 10 Years 1/2/1996* -------------------------------------------------------------------------------------------------------- Fund 24.50% 29.26% 31.49% 17.19% 18.31%
* Combined LP & MF Performance ** Source: Citigroup Global Markets Inc. Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 4 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,185.70 $5.99 Hypothetical (5% return per year before expenses) $1,000.00 $1,019.45 $5.54
-------------- + Expenses are equal to the Fund's annualized expense ratio of 1.10%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 5 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Country Sector Investments ---------------------------------------------------------------------------------------------------- Inmet Mining Corp. Canada Materials 1.5% Hyundai Mipo Dockyard South Korea Industrials 1.3 Actelion Ltd. Switzerland Heath Care 1.2 Deutsche Boerse AG Germany Financials 1.1 Rautaruukki Oyj Finland Materials 1.1 Union Fenosa SA Spain Utilities 1.1 Incitec Pivot Ltd. Australia Materials 1.0 International Power PLC United Kingdom Utilities 0.9 The Swatch Group AG Switzerland Consumer Discretionary 0.9 Charter PLC United Kingdom Industrials 0.9 ---- 11.0%
* Excluding short-term securities.
Percentage of Geographic Region Allocation* Investments -------------------------------------------------------------------------------- Europe ex U.K. 47.1% United Kingdom 17.2 Asia ex Japan 13.1 Japan 15.6 Americas ex U.S. 7.0 ---- 100%
The Fund is actively managed. Current holdings may be different than those presented above. 6 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--92.8% COMMON EQUITIES--90.8% Australia--4.5% Babcock & Brown Ltd. 134,960 3,289,903 Challenger Financial Services Group Ltd. 713,800 3,927,242 Cochlear Ltd. 33,800 2,338,342 Computershare Ltd. 176,500 1,455,057 Goodman Fielder Ltd. 1,031,900 2,362,527 Incitec Pivot Ltd. 68,800 5,222,484 Oxiana Ltd. 738,100 2,541,361 Seven Network Ltd. 205,352 2,387,205 Sims Group Ltd. 65,260 1,869,390 25,393,511 Austria--0.4% Andritz AG 35,500 2,452,684 Belgium--1.6% Mobistar SA 29,900 2,615,804 NV Union Miniere SA 19,360 4,626,995 Omega Pharma SA 20,400 1,789,060 9,031,859 Canada--6.5% Astral Media, Inc. 77,500 3,416,734 Axcan Pharma, Inc. 91,500 (a) 1,890,914 Canaccord Captial, Inc. 105,900 2,021,301 Canadian West Bank 66,200 1,897,325 Crescent Point Energy Trust 81,700 1,712,216 Gildan Activewear, Inc. 93,300 (a) 3,695,783 Inmet Mining Corp. 80,400 8,065,064 Martinrea International, Inc. 115,400 (a) 1,984,453 Metro, Inc. 56,000 1,971,038 Northbridge Financial Corp. 42,000 1,474,055 Sherritt International Corp. 281,300 4,503,516 Trinidad Energy Services Income Trust 114,900 1,503,267 WestJet Airlines Ltd. 133,000 (a) 2,308,508 36,444,174 Denmark--0.7% D/S Norden A/S 17,100 1,826,042 Sydbank A/S 46,000 2,002,718 3,828,760
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- Finland--2.7% Elisa Oyj 46,100 1,433,101 KCI Konecranes Oyj 79,800 3,210,151 Nokian Renkaat Oyj 65,200 2,553,099 Rautaruukki Oyj 94,900 5,750,061 Wartsila Oyj 29,800 2,041,875 14,988,287 France--8.2% Air France-KLM 52,500 1,929,271 Alstom 11,650 2,368,501 Arkema 25,900 (a) 1,577,426 Bourbon SA 23,350 1,524,341 Business Objects SA 38,000 (a) 1,696,084 CNP Assurances 35,040 4,482,543 Compagnie Generale de Geophysique SA 13,700 (a) 4,476,720 Compagnie Generale des Etablissements Michelin 23,500 3,159,417 Eramet 8,950 3,259,594 Euler Hermes SA 28,160 3,753,396 Haulotte Group 66,400 2,504,455 Ipsen SA 43,100 2,486,081 Ipsos 47,600 1,774,320 Lagardere SCA 25,690 2,186,680 Neuf Cegetel 42,500 (a) 1,859,967 Nexans SA 21,330 3,508,553 Pierre & Vacances 13,100 1,817,809 SEB SA 9,700 1,805,102 46,170,260 Germany--6.7% Aareal Bank AG 68,400 3,365,075 Deutsche Boerse AG 43,040 5,861,316 Hannover Rueckversicheru 32,400 1,643,881 Hypo Real Estate Holding AG 65,990 3,752,777 Lanxess 46,900 2,225,746 MAN AG 29,200 4,249,280 MTU Aero Engines Holding AG 45,200 2,752,237 Salzgitter AG 21,700 4,262,254 Software AG 30,360 2,850,435 Stada Arzneimittel AG 37,260 2,429,761 Vivacon AG 98,000 2,550,401 Wincor Nixdorf AG 21,540 1,781,530 37,724,693 Greece--0.3% Metka SA 70,710 1,764,568
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- Hong Kong--1.5% CITIC International Financial Holdings Ltd. 1,972,000 1,578,331 Pacific Basin Shipping Ltd. 658,000 1,381,805 Wing Hang Bank Ltd. 223,400 2,569,931 Wing Lung Bank 286,900 2,973,698 8,503,765 Ireland--0.7% Grafton Group PLC 172,570 1,932,750 Greencore Group PLC 289,500 1,882,491 3,815,241 Italy--3.7% Azimut Holding SPA 301,600 4,644,881 Banca Popolare di Milano Scarl (BPM) 101,390 1,497,871 Cementir SPA 167,100 1,689,438 Credito Emiliano SPA 181,800 2,493,954 Fondiaria-Sai SPA 48,540 2,279,350 Indesit Co. SPA 73,200 1,261,993 Marr SPA 139,800 1,524,067 Milano Assicurazioni SPA 280,450 2,347,540 Pirelli & C Real Estate SPA 22,600 1,155,359 Recordati SPA 240,440 2,273,211 21,167,664 Japan--14.5% ABC-MART, Inc. 80,100 1,739,788 Ardepro Co., Ltd. 8,230 2,135,057 Asahi Pretec Corp. 81,300 2,654,087 Atrium Co., Ltd. 63,100 1,735,841 Chiyoda Integre Co., Ltd. 45,900 986,968 Chugoku Marine Paints Ltd. 136,600 1,770,675 Comsys Holdings Corp. 152,100 1,668,373 Dowa Holdings Co., Ltd. 292,800 3,708,749 Goldcrest Co., Ltd. 39,390 1,810,562 Hisamitsu Pharmaceutical Co., Ltd. 74,600 2,026,221 Hitachi Construction Machinery Co., Ltd. 77,700 3,104,753 Hitachi Kokusai Electric, Inc. 152,500 1,905,088 Hogy Medical Co., Ltd. 37,400 1,761,417 Izumi Co. Ltdronics, Inc. 145,300 1,982,111 Joint Corp. 73,700 1,969,696 K's Holdings Corp. 78,900 1,720,593 Kenedix, Inc. 1,840 3,203,622 Kintetsu World Express, Inc. 52,200 1,785,897 Kyowa Exeo Corp. 191,500 2,008,858
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- Japan (continued) Makino Milling Machine Co., Ltd. 169,400 1,787,349 Makita Corp. 48,300 2,119,196 Mitsumi Electric Co., Ltd. 61,000 2,490,555 Mori Seiki Co., Ltd. 89,300 2,308,880 Nihon Dempa Kogyo Co., Ltd. 29,200 1,820,075 Nippon Chemi-Con Corp. 175,100 1,551,770 Nippon Sheet Glass Co., Ltd. 264,000 1,613,372 Nissin Kogyo Co., Ltd. 121,300 3,495,282 NSD Co., Ltd. 162,800 2,576,568 Sanyo Shokai Ltd. 175,600 1,291,739 Takeuchi MFG. Co., Ltd. 47,300 2,709,445 Toho Pharmaceutical Co., Ltd. 103,000 1,770,915 Tokai Rika Co., Ltd. 108,000 3,008,618 Tosoh Corp. 466,000 3,022,286 Toyo Suisan Kaisha Ltd. 234,300 4,405,746 Tsuruha Holdings, Inc. 44,700 1,494,281 Urban Corp. 99,000 1,605,615 Yamaguchi Financial Group, Inc. 288,000 3,008,618 81,758,666 Luxembourg--0.4% Oriflame Cosmetics SA SDR 37,400 2,270,679 Netherlands--4.3% Aalberts Industries NV 128,380 3,060,928 ASM International NV 67,200 1,918,461 Core Laboratories NV 16,500 (a) 2,101,935 Fugro NV 51,200 4,156,528 Imtech NV 22,200 1,824,088 Koninklijke BAM Groep NV 57,400 1,529,821 Nutreco Holding NV 51,690 3,653,802 Sligro Food Group NV 55,597 2,531,453 TomTom NV 44,000 (a) 3,420,175 24,197,191 Norway--1.4% Ementor ASA 323,000 (a) 2,921,831 Tandberg ASA 104,700 2,518,180 TGS Nopec Geophysical Co. ASA 115,300 (a) 2,361,698 7,801,709 Portugal--0.3% Banco BPI SA 223,750 1,882,498 Singapore--0.4% Wing Tai Holdings Ltd. 961,800 2,499,864
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- South Korea--5.2% Daegu Bank 66,070 1,224,053 Daelim Industrial Co., Ltd. 15,540 2,879,036 Hite Brewery Co., Ltd. 15,070 2,108,383 Honam Petrochemical Corp. 19,080 3,149,065 Hyundai Mipo Dockyard 19,080 6,569,243 Jusung Engineering Co., Ltd. 104,900 (a) 3,084,282 Korea Zinc Co., Ltd. 23,460 4,436,091 Pusan Bank 161,760 2,970,344 Simm Tech Co., Ltd. 241,900 2,723,325 29,143,822 Spain--4.0% Banco Pastor SA 61,600 1,020,719 Bankinter SA 135,600 1,954,926 Bolsas y Mercados Espanoles 43,800 2,719,456 Fomento de Construcciones y Contratas SA 45,300 3,665,925 Gestevision Telecinco SA 55,900 1,467,524 Obrascon Huarte Lain SA 34,400 1,288,169 Sol Melia SA 65,000 1,224,435 Tubacex SA 226,330 2,220,496 Union Fenosa SA 95,040 5,623,017 Viscofan SA 70,400 1,642,387 22,827,054 Sweden--1.3% Alfa Laval AB 41,200 2,651,729 Getinge AB 72,200 1,748,917 NCC AB 78,000 1,956,026 Trelleborg AB 50,800 1,198,988 7,555,660 Switzerland--5.0% Actelion Ltd. 110,900 (a) 6,146,816 Galenica Holding AG 4,780 2,043,525 Georg Fischer AG 4,200 2,892,756 Holcim Ltd. 17,800 1,967,071 Julius Baer Holding AG 43,700 3,268,957 Rieter Holding AG 5,110 2,766,435 Sika AG 1,694 3,301,531 The Swatch Group AG 14,250 4,677,752 Vontobel Holding AG 27,900 1,430,124 28,494,967 Ukraine--0.5% Michael Page International PLC 353,500 2,982,868
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------- United Kingdom--16.0% Amlin PLC 357,400 2,408,966 Antofagasta PLC 107,200 1,672,073 Barratt Developments PLC 149,020 2,280,168 Bellway PLC 47,800 1,008,109 Berkley Group Holdings PLC 50,200 1,472,562 BPP Holdings 114,900 1,438,441 British Airways PLC 265,200 (a) 2,079,105 Britvic PLC 283,200 1,871,184 Burren Energy PLC 196,600 3,378,186 Carphone Warehouse Group PLC 234,500 1,671,731 Cattles PLC 279,700 1,996,819 Charter PLC 192,810 (a) 4,665,896 Cookson Group PLC 212,300 3,313,563 Croda International PLC 152,200 1,992,578 Daily Mail and General Trust PLC 166,400 2,144,443 Dairy Crest Group PLC 151,600 1,950,611 Dana Petroleum PLC 70,300 (a) 1,671,022 DS Smith PLC 376,270 1,437,411 Enterprise Inns PLC 172,500 2,088,967 Firstgroup PLC 142,800 2,011,189 Galliford Try PLC 548,600 1,649,658 GKN PLC 330,900 2,396,187 Greene King PLC 82,100 1,481,264 Halfords Group PLC 204,100 1,480,062 Inchcape PLC 292,200 2,516,419 Informa PLC 274,900 2,814,489 International Power PLC 532,700 4,917,231 Interserve PLC 184,500 1,794,600 Invensys PLC 346,810 (a) 2,201,021 John Wood Group PLC 453,500 3,675,930 Kelda Group PLC 88,567 1,561,707 Kier Group PLC 49,010 1,831,656 Mcbride PLC 527,200 1,876,486 Morgan Crucible Co. PLC 316,810 1,921,517 Morgan Sindall PLC 59,600 1,908,013 N Brown Group PLC 234,133 1,302,725 Petrofac Ltd. 298,000 2,801,061 Regus Group PLC 688,500 1,732,327 Restaurant Group PLC 301,214 1,665,182 Savills PLC 222,300 1,670,021
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------- United Kingdom (continued) Speedy Hire PLC 75,330 1,668,849 Sthree PLC 185,100 1,109,417 Thomas Cook Group PLC 255,590 1,456,095 89,984,941 TOTAL COMMON EQUITIES (Cost $428,684,904) 512,685,385 PREFFERED STOCKS--1.8% Germany--1.8% Fresenius AG 50,300 3,914,186 Fuchs Petrolub AG 24,900 2,298,039 Hugo Boss AG 35,000 2,374,219 ProSiebenSat.1 Media AG 51,100 1,606,024 TOTAL PREFERRED STOCKS (Cost $7,483,309) 10,192,468 SHORT-TERM INVESTMENTS--0.2% Rate Maturity Par Value U.S. Government--.2% ---- -------- --------- U.S. Treasury Bill (Cost $1,388,625) 3.90% 12/13/2007 1,400,000 (b,c) 1,388,625 TOTAL UNAFFILIATED INVESTMENTS (Cost $437,556,838) 524,266,478 AFFILIATED INVESTMENTS--0.3% Shares Dreyfus Institutional Preferred Plus Money Market Fund ---------- (Cost $1,633,445) 1,633,445 (d) 1,633,445 ----------- TOTAL INVESTMENTS--93.1% (Cost $439,190,283) 525,899,923 OTHER ASSETS, LESS LIABILITIES--6.9% 38,795,923 ----------- NET ASSETS--100% 564,695,846 ===========
Notes to Schedule of Investments: a Non-income producing security. b Denotes all or part of security segretated as collateral for futures transactions. c Rate noted is yield to maturity. d Affiliated institutional money market fund. At September 30, 2007 the Fund held the following forward foreign currency exchange contracts:
Local Principal Contract Value at USD Amount Unrealized Contracts to Receive Amount Value Date September 30, 2007 to Deliver Appreciation ---------------------------------------------------------------------------------------------------------------------------- Euro 1,649,421 10/1/2007 $2,352,074 $2,336,405 $15,669 =======
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Local Unrealized Principal Contract Value at USD Amount Appreciation Contracts to Deliver Amount Value Date September 30, 2007 to Receive (Depreciation) ------------------------------------------------------------------------------------------------------------------------------- Australian Dollar 1,387,534 10/2/2007 $1,231,298 $1,229,930 $ 1,368) British Pound 616,924 10/1/2007 1,261,980 1,249,394 (12,586) British Pound 2,988,573 10/2/2007 6,113,425 6,093,103 (20,322) Canadian Dollar 2,236,682 10/2/2007 2,249,278 2,250,862 1,584 Danish Krone 1,217,378 10/2/2007 232,973 232,284 (689) Euro 6,745,294 10/2/2007 9,618,789 9,591,134 (27,655) Japanese Yen 405,383,880 10/1/2007 3,529,067 3,504,053 (25,014) Japanese Yen 526,461,720 10/2/2007 4,583,109 4,579,521 (3,588) Norwegian Krone 2,649,051 10/2/2007 491,047 488,160 (2,887) Singapore Dollar 234,957 10/2/2007 158,210 158,402 192 South Korea Won 2,907,334,459 10/1/2007 3,177,762 3,172,883 (4,879) Swedish Krona 3,905,138 10/2/2007 606,379 603,483 (2,896) Swiss Franc 2,001,171 10/2/2007 1,719,662 1,712,745 (6,917) --------- $(107,025) =========
At September 30, 2007 the Fund held the following futures contracts:
Underlying Face Unrealized Contract Position Expiration Date Amount at Value Appreciation ------------------------------------------------------------------------------------------------------------------------ MSCI Pan-Euro (1501 Contracts) Long 12/18/2007 54,666,480 $126,356 Topix (100 Contracts) Long 12/31/2007 14,137,721 604,560 -------- $730,916 ========
Percentage of Economic Sector Allocation Net Assets -------------------------------------------------------- Consumer Discretionary 15.8% Consumer Staples 5.6 Energy 5.2 Financials 17.7 Health Care 5.8 Industrials 20.0 Information Technology 5.5 Materials 13.5 Telecommunication Services 1.1 Utilities 2.1 Short-term and Other Assets 7.7 ----- 100.0%
The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investments in securities: Unaffiliated issuers, at value (Note 1A) (cost $437,556,838) $524,266,478 Afffiliated issuers, at value (Note 1A) (cost $1,633,445) (Note 1H) 1,633,445 Cash Collateral at broker for futures contracts 2,790,000 Receivable for investments sold 42,431,770 Interest and dividends receivable 1,643,908 Foreign Currency (cost $1,146,134) 1,254,822 Receivable for Fund shares sold 83,670 Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 17,445 Prepaid expenses 27,452 ------------ Total assets 574,148,990 Liabilities Payable for investments purchased $ 5,818,462 Payable for Fund shares redeemed 3,172,222 Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 108,801 Payable for variation margin on open futures contracts (Note 6) 28,941 Accrued accounting, administration, custody and transfer agent fees (Note 2) 185,537 Accrued administrative service fees (Note 2) 56,002 Accrued professional fees 59,003 Accrued trustees' fees (Note 2) 14,396 Accrued chief compliance officer fee (Note 2) 367 Accrued shareholders reporting expense (Note2) 7,280 Other accrued expenses and liabilities 7,012 ----------- Total liabilities 9,458,023 ------------ Net Assets $564,690,967 ============ Net Assets consist of: Paid-in capital $298,595,817 Accumulated net realized gain 179,279,267 Distributions in excess of net investment income (1,042,463) Net unrealized appreciation 87,858,346 ------------ Total Net Assets $564,690,967 ============ Shares of beneficial interest outstanding 21,129,396 ============ Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 26.73 ============
The accompanying notes are an integral part of the financial statements. 15 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Statement of Operations For the Year Ended September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments (net foreign withholding taxes $42,530) $ 647,159 Dividend income from affiliated investments (Note 1H) 18,137 Interest income 1,269 Allocated investment income from portfolio (Note 9) 14,108,960 Allocated expenses from portfolio (Note 9) (8,623,752) ------------ 6,151,773 Expenses Investment advisory fee (Note 2) $ 178,854 Accounting, administration, custody and transfer agent fees (Note 2) 67,434 Administrative service fees (Note 2) 116,109 Trustees' fees (Note 2) 3,958 Registration fees 49,086 Professional fees 85,185 Insurance expense 3,349 Miscellaneous expenses 68,295 ------------ Total expenses 572,270 Deduct: Waiver of investment advisory fee (Note 2) (29,167) ------------ Net expenses 543,103 ------------ Net investment income 5,608,670 ------------ Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 21,353,186 Financial futures transactions 411,930 Foreign currency transactions and forward foreign currency exchange transactions 257,462 Allocation of realized gain from portfolio (Note 9) 214,179,162 Net realized gain (loss) ------------ 236,201,740 Change in unrealized appreciation (depreciation) on: Investments (5,461,681) Financial futures contracts 156,049 Foreign currency translations and forward foreign currency exchange contracts 141,616 Allocation of unrealized depreciation from portfolio (Note 9) (69,417,596) ------------ Net change in net unrealized appreciation (depreciation) (74,581,612) ------------ Net realized and unrealized gain (loss) on investments 161,620,128 ------------ Net Increase in Net Assets from Operations $167,228,798 ============
The accompanying notes are an integral part of the financial statements. 16 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Statements of Changes in Net Assets --------------------------------------------------------------------------------
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 5,608,670 $ 5,296,981 Net realized gain (loss) 236,201,740 61,512,475 Change in net unrealized appreciation (depreciation) (74,581,612) 63,997,049 ------------- ------------- Net increase (decrease) in net assets from investment operations 167,228,798 130,806,505 ------------- ------------- Distributions to Shareholders (Note 1 C) From net investment income (6,095,758) (5,719,295) From net realized gains on investments (85,487,253) (33,657,881) ------------- ------------- Total distributions to shareholders (91,583,011) (39,377,176) ------------- ------------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 82,897,738 225,167,277 Value of shares issued in reinvestment of distributions 59,663,488 25,672,328 Cost of shares redeemed (net of redemption fees of $7,754 and $24,385, respectively) (412,206,585) (108,488,250) ------------- ------------- Net increase (decrease) in net assets from Fund share transactions (269,645,359) 142,351,355 ------------- ------------- Total Increase (Decrease) in Net Assets (193,999,572) 233,780,684 Net Assets At beginning of year 758,690,539 524,909,855 ------------- ------------- At end of year [including distributions in excess of net investment income of ($1,042,463) and ($53,607), respectively] $ 564,690,967 $ 758,690,539 ============= =============
The accompanying notes are an integral part of the financial statements. 17 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, -------------------------------------------------------------- 2007 2006 2005 2004 2003 -------- -------- -------- -------- ------- Net Asset Value, Beginning of Year $ 24.03 $ 20.84 $ 15.93 $ 12.05 $ 8.91 -------- -------- -------- -------- ------- From Investment Operations: Net investment income* (a) 0.13 0.18 0.23 0.14 0.10 Net realized and unrealized gains (loss) on investments 5.48 4.52 5.86 3.86 3.13 -------- -------- -------- -------- ------- Total from operations 5.61 4.70 6.09 4.00 3.23 -------- -------- -------- -------- ------- Less Distributions to Shareholders: From net investment income (0.19) (0.19) (0.17) (0.12) (0.09) From net realized gains on investments (2.72) (1.32) (1.01) -- -- -------- -------- -------- -------- ------- Total distributions to shareholders (2.91) (1.51) (1.18) (0.12) (0.09) -------- -------- -------- -------- ------- Net Asset Value, End of Year $ 26.73 $ 24.03 $ 20.84 $ 15.93 $ 12.05 ======== ======== ======== ======== ======= Total Return 24.50%(b) 23.72% 40.20% 33.35% 36.47%(b) Ratios/Supplemental data: Expenses (to average daily net assets) * (c) 1.10% 1.11% 1.16% 1.27% 1.39% Net Investment Income (to average daily net assets)* 0.68% 0.79% 1.26% 0.99% 1.01% Portfolio Turnover (d) 88% 65% 50% 72% 15%(e) Net Assets, End of Year (000's omitted) $564,691 $758,691 $524,910 $212,032 $89,570 ---------------- * The investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimburse the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios without waivers and reimbursement would have been: Net investment income per share (a) $0.13 N/A N/A N/A $0.08 Ratios (to average daily net assets): Expenses (c) 1.12% N/A N/A N/A 1.65% Net investment income 0.66% N/A N/A N/A 0.75%
(a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) For the period October 1, 2006 to September 19, 2007 and for the fiscal years ended September 30, 2003-2006, the ratio includes the Fund's share of the TBC International Small Cap Portfolio's allocated expenses. (d) On September 19, 2007, the Fund, which had owned approximately 100% of the Portfolio on such date, withdrew entirely from the Portfolio and received the Portfolio's securities and cash in exchange for its interests in the Portfolio. Effective September 20, 2007, the Fund began investing directly in the securities in which the Portfolio had invested. Portfolio turnover represents investment activity of both the Fund and the Portfolio for the year. The amounts shown for 2004-2006 are the ratios for the Portfolio. (e) Portfolio turnover represents activity while the Fund was investing directly in securities until January 23, 2003. The Portfolio turnover for the period January 24, 2003 to September 30, 2003 was 46%. The accompanying notes are an integral part of the financial statements. 18 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company International Small Cap Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of companies that are located in foreign countries represented in the S&P Citigroup World Extended Market Ex.-U.S. (EMI Ex-U.S.) Index. The EMI Ex-U.S. Index is made up of those companies representing the lowest 20% of each country's total available market capitalization. The Fund may invest up to 25% of assets in emerging market countries. Prior to September 20, 2007, the Fund had invested substantially all of its investable assets in The Boston Company International Small Cap Portfolio (the "Portfolio"), a subtrust of the Mellon Institutional Funds Master Portfolio, the "Portfolio Trust", a New York trust. The Portfolio had investment objectives, policies, limitations and accounting policies substantially identical to those of the Fund. While investing in the Portfolio, the Fund earned its proportionate share of the Portfolio's income, expenses, and realized and unrealized gains and losses based on its percentage ownership of the Portfolio's shares of beneficial interest. The Portfolio's Statement of Operations for the period October 1, 2006 through September 19, 2007 is included in Note 9. On September 19, 2007, the Fund, which owned 100% of the Portfolio on that date, withdrew entirely from the Portfolio and received the Portfolio's assets, including securities and cash, and assumed the Portfolio's stated liabilities in exchange for its interest in the Portfolio. Effective September 20, 2007, the Fund began investing directly in the securities in which the Portfolio had invested. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") is calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Because foreign markets may be open at different times than the NYSE, the value of the Fund's shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect the events that occur after such close but before the close of the NYSE. If market quotations are not readily available or do not accurately reflect fair value, or the value of a security has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), the Fund may value its assets by a method the Trustees believe accurately reflects the fair value. The Trustees have adopted fair value pricing procedures, which, among other things, require the Fund to fair value such securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised by the Trustees from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices for foreign securities will be used by the Fund to a significant extent. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. 19 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Dividends representing a return of capital are reflected as a reduction of cost. Realized gains and losses from securities sold are recorded on the identified cost basis. Income, expenses and realized and unrealized gains and losses allocated from the Portfolio represent the Fund's proportionate share of those items earned by the Portfolio during the period October 1, 2006 through September 19, 2007. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to differing treatments for foreign currency transactions, losses deferred due to wash sales, passive foreign investment companies (PFIC) and equalization. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. Section 988 of the Internal Revenue Code ("Code") provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. On July 31, 2007, the Dreyfus Premier International Small Cap Fund ("Dreyfus Feeder") withdrew from the master feeder structure via a redemption-in-kind and received currency and securities with unrealized appreciation of $79,724,556 for the value of their interest in the Portfolio. The Fund realized no gain on this transaction. $59,333,708 of unrealized appreciation had been allocated to that feeder fund. The Fund increased paid in capital and decreased unrealized appreciation on investments by $20,390,848 to recognize this difference. This reclassification had no impact on the net assets or results of operations of the Fund. D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Foreign currency transactions The Fund maintains its books and records in U.S. dollars. Investment security valuations and other assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. F. Foreign investment risk There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. 20 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- G. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. H. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. I. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: Prior to September 20, 2007 the Fund did not directly incur any investment advisory, custody, administration and commitment fees, which were incurred by the Portfolio and allocated to the Fund based on its proportionate interest in the Portfolio. The following disclosures relating to these fees represent fees incurred by the Portfolio for the period prior to September 20, 2007, and by the Fund thereafter. The investment advisory fee paid to TBCAM for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 1.00% of the Fund's average daily net assets. For the period of September 1, 2007 through August 31, 2008, TBCAM has agreed to rebate 0.25% of its management fee to the Fund. This rebate will end on September 1, 2008, and on such date the Fund's contractual advisory fee will again be in effect. This rebate will not change any existing voluntary total expense limitation arrangements that are in effect, as TBCAM will continue its commitment to maintain such total expense limitations during this rebate period. For the period October 1, 2006 through September 19, 2007, TBCAM rebated $103,350 of its investment advisory fees charged to the Portfolio. For the period September 20, 2007 through September 30, 2007, TBCAM rebated $29,167 of its investment advisory fees charged to the Fund. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $45,781, for the year ended September 30, 2007. The Trust, and previously the Portfolio Trust, entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Portfolio/Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $697,943 for the period October 1, 2006 to September 19, 2007 and $21,653 for the period September 20, 2007 to September 30, 2007. The Trust, and previously the Portfolio Trust, also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Portfolio/Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, Mellon Bank earned 110,671 for the period October 1, 2006 to September 19, 2007 and $0 for the period September 20, 2007 to September 30, 2007. See Note 7 for further details. The Trust, and previously the Portfolio Trust, entered into two separate agreements with The Bank of New York that enable the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The 21 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $8,904 for the period October 1, 2006 to September 19, 2007 and $287 for the period September 20, 2007 to September 30, 2007, which is included in miscellaneous expenses on the statement of operations. See Note 8 for further details. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,255, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $12,684, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $107,882 for fees payable to BNY Mellon Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ------------- -------------- Non-U.S. Government Securities $ 959,625,642 $1,678,420,187 ============= ==============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 3,243,701 9,977,957 Shares issued to shareholders in reinvestment of 2,442,525 1,232,495 distributions (16,126,541) (4,831,166) ----------- ---------- Shares redeemed (10,440,315) 6,379,286 Net increase (decrease) =========== =========
At September 30, 2007, four shareholders of record, in the aggregate, held approximately 47.7% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund received $7,754 in redemption fees and is reflected in the cost of shares redeemed. 22 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact on the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $442,963,380 ============ Gross unrealized appreciation $127,590,141 Gross unrealized depreciation (23,023,185) ------------ Net unrealized appreciation (depreciation) $104,566,956 ============ Undistributed ordinary income $ 0 Undistributed capital gains 181,925,976 ------------ Total distributable earnings $181,925,976 ============ The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006 was as follows: 2007 2006 ------------ ------------ Ordinary income $ 7,794,858 $14,680,095 Capital gains 83,788,153 24,697,081 ------------ ----------- Total distributions $91,583,011 $39,377,176 ============ ============
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Futures contracts The Fund, and previously the Portfolio, may enter into financial futures contracts for the purchase or sale of securities, or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized appreciation or depreciation by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may also arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Fund enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At September 30, 2007, the Fund held open financial futures contracts. See the Schedule of Investments for further details. 23 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- Forward Foreign Currency Exchange Contracts The Fund, and previously the Portfolio, may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any appreciation or depreciation are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward foreign currency exchange contracts is included in the Statement of Assets and Liabilities. At September 30, 2007, the Fund held forward foreign currency exchange contracts. See Schedule of Investments for further details. (7) Security Lending: The Fund, and previously the Portfolio, may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund, and previously the Portfolio, loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $129,601 of which $18,930 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund did not have any securities out on loan. (8) Line of Credit: On behalf of the Fund and other funds in the Trust, and previously the Portfolios in the Portfolio Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund had average borrowings outstanding of $10,974,467 for a total of fifteen days and incurred interest expense of $26,806 for the period October 1, 2006 to September 19, 2007 and $10 for the period September 20, 2007 to September 30, 2007. At September 30, 2007, the Fund did not have a loan balance outstanding. 24 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Notes to Financial Statements -------------------------------------------------------------------------------- (9) Reorganization: Prior to September 19, 2007, the Fund had utilized a Master Feeder Fund structure where the Fund sought to achieve its investment objectives by investing all of its investable assets in the Boston Company International Small Cap Portfolio. Effective after the close of business on September 19, 2007, the Fund withdrew its assets from the Portfolio by means of a redemption-in-kind and now the Fund invests directly in portfolio securities. Below is the Statement of Operations for The Boston Company International Small Cap Portfolio for the period October 1, 2006 to September 19, 2007:
Investment Income (Note 1B) Dividend income from Unaffiliated investments $ 18,908,869 Dividend income from Affiliated investments 756,109 Interest income 149,085 Security lending income (Note 7) 110,671 ------------- Net investment income 19,924,734 Expenses Investment advisory fee (Note 2) $ 11,328,812 Accounting, administration and custody fees (Note 2) 697,943 Trustees' fees (Note 2) 62,482 Insurance expense 21,353 Miscellaneous expenses 15,848 ------------ Total expenses 12,126,438 Deduct: Waiver of investment advisory fee (Note 2) (103,350) ------------ Net expenses 12,023,088 ------------- Net investment income 7,901,646 ------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 275,894,656 Financial futures transactions 19,954 Foreign currency transactions and forward foreign currency exchange transactions (465,473) ------------ Net realized gain 275,449,137 Change in unrealized appreciation (depreciation) on: Investments (130,633,931) Financial futures transactions 574,867 Foreign currency translations and forward foreign currency exchange contracts 270,065 ------------ Net change in net unrealized appreciation (depreciation) (129,788,999) ------------- Net realized and unrealized gain (loss) on investments 145,660,138 ------------- Net Increase in Net Assets from Operations $ 153,561,784 =============
The accompanying notes are an integral part of the financial statements. 25 Mellon Institutional Funds Investment Trust The Boston Company International Small Cap Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Trust and Shareholders of The Boston Company International Small Cap Fund: In our opinion, the accompanying statement of assets and liabilities, including schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company International Small Cap Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 26 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ----------------------------------------------------------------------------------------------------------------------------------- Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $500 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $8,447 Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $500 c/o Harvard University 9/13/1989 Professor of Political Portfolio: $8,447 Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $500 P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $8,447 New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $500 c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $9,494 P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* * Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 27
Principal Officers who are Not Trustees Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years --------------------------------------------------------------------------------------------------------------------------------- Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 28 THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6939AR0907 MELLON INSTITUTIONAL FUNDS Annual Report The Boston Company Large Cap Core Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Stock prices were buoyed throughout the reporting period by positive U.S. and global economic growth and strong corporate earnings. However, the market's advance slowed during the second half of the reporting period as turmoil in the sub-prime mortgage market spread to other areas of the financial markets, derailing investor confidence. The fund participated fully in the market's rise, producing higher returns than its benchmark due to the success of our security selection process in a variety of market sectors. For the 12-month period ended September 30, 2007, The Boston Company Large Cap Core Fund returned 20.3% as compared to its benchmark, the S&P 500 Index, which returned 16.4%. The portfolio outperformed the S&P 500 Index, thanks largely to strong stock selection in the Consumer Discretionary and Information Technology sectors. Within Consumer Discretionary, an initial overweight in Hilton Hotels and a consistent overweight in McDonald's helped to boost performance. We liquidated Hilton Hotels after a private equity group offered shareholders a significant premium to the high end of the 52-week trading range, harvesting a return of more than 60% for the period. In the Information Technology sector, it was the telecommunications equipment and computer hardware industries that claimed the strongest relative performance. The superstar in the telecommunications equipment industry was Research In Motion. The maker of the multiple "Smartphones" experienced several successful new product launches and increased demand for this new breed of products, which resulted in several strong quarterly earnings reports that beat Wall Street's estimates soundly. In the computer hardware arena, Apple also enjoyed a strong, positive response from consumers to new product releases. This resulted in solid revenue, cash flow, gross margin and earnings growth. While we would prefer that all of our portfolio picks add value, we did have several stocks that slowed performance. Within Financials, two stocks in the capital markets industry (ETRADE Financial and Merrill Lynch) and one specialty insurance firm (Ambac Financial Group) accounted for much of the fund's underperformance. As expected, many financial institutions slipped during the period on the negative sentiment surrounding this past summer's sub-prime loan and liquidity crunch. Merrill Lynch stumbled due to investor perceptions that there was significant sub-prime loan exposure on the company's books. However, we feel that these views are unfounded and continue to hold the stock due to its well-diversified revenue stream and historically-attractive valuation. ETRADE Financial, a firm that had some exposure to mortgage loans on its books, also suffered. While they were not forced to liquidate and realize massive losses like some firms, they did decide to reduce loan exposure and ride out the mortgage storm. This was not an encouraging sign and the position was liquidated. The fund continues to rely on the disciplined process that has produced distinguished performance in the past. Based on our bottom-up stock selection process, we have identified what we believe are a relatively large number of attractive investments among technology companies. By contrast, we have reduced the fund's exposure to consumer discretionary stocks, where we see cautionary business trends and little earnings clarity. We have also trimmed the fund's energy positions in light of current valuations. We believe that these strategies should position the fund for continued, albeit slowing, economic growth. Sean Fitzgibbon, CFA Jeffery McGrew, CFA Portfolio Manager Portfolio Manager The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
2 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Comparison of Change in Value of $100,000 Investment in The Boston Company Large Cap Core Fund and the Standard & Poor's 500 --------------------------------------------------------------------------------
Standard & Poor's 500 TBC Composite Stock PERIOD Large Cap Core Fund Price Index * 9/30/97 100,000 100,000 12/31/97 100,845 102,871 3/31/98 113,593 117,210 6/30/98 111,474 121,102 9/30/98 90,673 109,083 12/31/98 108,113 132,291 3/31/99 100,563 138,879 6/30/99 108,630 148,650 9/30/99 101,816 139,392 12/31/99 107,924 160,116 3/31/00 113,769 163,783 6/30/00 111,894 159,432 9/30/00 118,635 157,887 12/31/00 128,172 145,542 3/31/01 121,262 128,298 6/30/01 123,487 135,801 9/30/01 110,112 115,876 12/31/01 117,751 128,257 3/31/02 120,413 128,611 6/30/02 109,598 111,390 9/30/02 90,626 92,158 12/31/02 97,118 99,922 3/31/03 93,345 96,775 6/30/03 108,052 111,665 9/30/03 110,334 114,620 12/31/03 123,558 128,567 3/31/04 126,135 130,743 6/30/04 126,703 132,992 9/30/04 124,895 130,505 12/31/04 137,159 142,548 3/31/05 135,413 139,486 6/30/05 136,621 141,395 9/30/05 141,595 146,490 12/31/05 144,885 149,542 3/31/06 151,715 155,832 6/30/06 148,235 153,587 9/30/06 155,477 162,279 12/31/06 167,657 173,141 3/31/07 169,894 174,254 6/30/07 181,335 185,186 9/30/07 187,001 188,944
Average Annual Total Returns (for period ended 9/30/2007) -------------------------------------------------------------------------------- Since Inception 1 Year 3 Years 5 Years 10 Years 1/3/1991 -------------------------------------------------------------------------------- Fund 20.27% 14.40% 15.60% 6.46% 12.78%
* Source: Lipper Inc. Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ----------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,100.90 $4.21 Hypothetical (5% return per year before expenses) $1,000.00 $1,021.06 $4.05
----------- + Expenses are equal to the Fund's annualized expense ratio of 0.80%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 4 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments -------------------------------------------------------------------------------- ConocoPhillips Energy 3.4% General Electric Co. Industrials 2.9 Altria Group, Inc. Consumer Staples 2.4 AT&T, Inc. Telecommunications Services 2.4 Chevron Corp. Energy 2.3 Bank of America Corp. Financials 2.3 Verizon Communications, Inc. Telecommunications Services 2.2 Cisco Systems, Inc. Technology 2.1 American International Group, Inc. Financials 2.1 JPMorgan Chase & Co. Financials 2.1 ---- 24.2%
*Excludes short-term securities.
Percentage of Economic Sector Allocation Net Assets ------------------------------------------------------ Consumer Discretionary 7.9% Consumer Staples 9.0 Energy 11.7 Financials 19.6 Health Care 10.3 Industrials 10.0 Materials 3.0 Technology 20.0 Telecommunications Services 4.5 Utilities 3.0 Short-term and Net other Assets 1.0 ----- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--99.0% EQUITIES--99.0% Consumer Discretionary--7.9% Best Buy Co., Inc. 20,130 926,383 Coach, Inc. 12,700 (a) 600,329 Johnson Controls, Inc. 7,420 876,376 McDonald's Corp. 33,968 1,850,237 Omnicom Group, Inc. 32,880 1,581,199 Ross Stores, Inc. 16,770 429,983 Target Corp. 18,500 1,176,045 TJX Cos., Inc. 29,150 847,391 Walt Disney Co. 40,640 1,397,610 9,685,553 Consumer Staples--9.0% Altria Group, Inc. 41,650 2,895,924 Cadbury Schweppes PLC--ADR 17,180 799,214 Coca-Cola Enterprises, Inc. 41,090 995,200 CVS Caremark Corp. 25,160 997,091 Pepsico, Inc. 20,500 1,501,830 Supervalu, Inc. 31,260 1,219,453 The Kroger Co. 54,330 1,549,492 Wal-Mart Stores, Inc. 23,630 1,031,450 10,989,654 Energy--11.7% Chesapeake Energy Corp. 32,440 1,143,834 Chevron Corp. 30,162 2,822,560 ConocoPhillips 47,460 4,165,564 ENSCO International, Inc. 15,620 876,282 Exxon Mobil Corp. 6,984 646,439 Marathon Oil Corp. 12,920 736,698 Nabors Industries Ltd. 27,000 (a) 830,790 National-Oilwell Varco, Inc. 12,000 (a) 1,734,000 XTO Energy, Inc. 21,920 1,355,533 14,311,700 Financials--19.6% American Express Co. 31,260 1,855,906 American International Group, Inc. 38,139 2,580,103 Bank of America Corp. 56,060 2,818,136 CIT Group, Inc. 19,640 789,528 Citigroup, Inc. 35,736 1,667,799 CME Group 2,295 1,347,968 Fannie Mae 21,800 1,325,658 JPMorgan Chase & Co. 55,100 2,524,682
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------- Financials (continued) Merrill Lynch & Co., Inc. 17,780 1,267,358 Metlife, Inc. 20,570 1,434,346 Morgan Stanley 22,920 1,443,960 T Rowe Price Group, Inc. 23,490 1,308,158 Wachovia Corp. 35,920 1,801,388 Wells Fargo & Co. 51,080 1,819,470 23,984,460 Health Care--10.3% Baxter International, Inc. 34,690 1,952,353 Becton Dickinson & Co. 7,920 649,836 Cigna Corp. 19,430 1,035,425 Covidien Ltd. 6,537 271,285 Hospira, Inc. 23,360 (a) 968,272 Merck & Co., Inc. 27,470 1,419,924 Pfizer, Inc. 79,060 1,931,436 Schering-Plough Corp. 71,210 2,252,372 Thermo Fisher Scientific, Inc. 22,590 (a) 1,303,895 Zimmer Holdings, Inc. 10,190 (a) 825,288 12,610,086 Industrials--10.0% Dover Corp. 16,820 856,979 Eaton Corp. 14,820 1,467,773 Emerson Electric Co. 24,300 1,293,246 General Electric Co. 84,190 3,485,466 Goodrich Corp. 14,800 1,009,804 L-3 Communications Holdings, Inc. 8,320 849,805 Raytheon Co. 9,690 618,416 Textron, Inc. 34,940 2,173,617 Tyco International Ltd. 6,537 289,851 US Airways Group, Inc. 10,482 (a) 275,153 12,320,110 Materials--3.0% Air Products & Chemicals, Inc. 15,620 1,527,011 Allegheny Technologies, Inc. 11,340 1,246,833 Rohm & Haas Co. 16,050 893,503 3,667,347 Technology--20.0% Amphenol Corp., Class A 23,850 948,276 Apple Computer, Inc. 12,530 (a) 1,923,856 Broadcom Corp., Class A 21,850 (a) 796,214 Cisco Systems, Inc. 78,510 (a) 2,599,466 Cognizant Technology Solutions Corp., Class A 22,840 (a) 1,821,947
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------------------------------- Technology (continued) EMC Corp. 76,090 (a) 1,582,672 Google, Inc., Class A 3,100 (a) 1,758,537 Hewlett-Packard Co. 40,900 2,036,411 Intel Corp. 68,390 1,768,565 McAfee, Inc. 24,110 (a) 840,716 Microsoft Corp. 70,290 2,070,743 National Semiconductor Corp. 41,210 1,117,615 Oracle Corp. 73,710 (a) 1,595,821 Qualcomm, Inc. 34,090 1,440,643 Research In Motion Ltd. 7,040 (a) 693,792 Texas Instruments, Inc. 42,640 1,560,198 24,555,472 Telecommunication Services--4.5% AT&T, Inc. 67,970 2,875,811 Verizon Communications, Inc. 60,270 2,668,756 5,544,567 Utilities--3.0% PG&E Corp. 29,170 1,394,326 Sempra Energy 40,000 2,324,800 3,719,126 TOTAL UNAFFILIATED INVESTMENTS (Cost $104,552,327) 121,388,075 AFFILIATED INVESTMENTS--0.6% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $722,661) 722,661 (b) 722,661 ----------- TOTAL INVESTMENTS--99.6% (Cost $105,274,988) 122,110,736 OTHER ASSETS, LESS LIABILITIES--0.4% 480,701 ----------- NET ASSETS--100% 122,591,437 ===========
Notes to Schedule of Investments: ADR - American Depository Receipts (a) Non-income producing security. (b) Affilated institutional money market fund. The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investments in securities: Unaffiliated issuers, at value (Note 1A) (cost $104,552,327) $121,388,075 Affiliated issuers, at value (Note 1A) (cost $722,661) 722,661 Receivable for Fund shares sold 26,094 Receivable for securities sold 608,724 Interest and dividend receivable 155,380 Prepaid expenses 5,772 ------------ Total assets 122,906,706 Liabilities Payable for Fund shares redeemed $ 180,000 Accrued administrative service fee (Note 2) 36,827 Accrued professional fees 36,203 Accrued accounting, administration, custody and transfer agent fees (Note 2) 27,041 Accrued trustees' fees (Note 2) 4,422 Accrued shareholder reporting expense (Note2) 567 Accrued chief compliance officer fee (Note 2) 367 Other accrued expenses and liabilities 29,842 ---------- Total liabilities 315,269 ------------ Net Assets $122,591,437 ============ Net Assets consist of: Paid-in capital $ 97,045,306 Accumulated net realized gain 8,209,635 Undistributed net investment income 500,748 Net unrealized appreciation 16,835,748 ------------ Total Net Assets $122,591,437 ============ Shares of beneficial interest outstanding 2,832,707 ============ Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 43.28 ============
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Statement of Operations For the Year Ended September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments (net of foreign withholding taxes of $3,653) $ 2,057,603 Dividend income from affiliated investments (Note 1F) 109,478 Interest income 7,622 ----------- Total investment income 2,174,703 Expenses Investment advisory fee (Note 2) $ 588,140 Administrative service fee (Note 2) 145,212 Accounting, administration, custody and transfer agent fees (Note 2) 111,547 Professional fees 42,010 Registration fees 20,898 Trustees' fees (Note 2) 16,035 Insurance expense 4,426 Miscellaneous expenses 14,168 ---------- Total expenses 942,436 ----------- Net investment income 1,232,267 ----------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 8,647,246 Financial futures transactions 71,668 ---------- Net realized gain (loss) 8,718,914 Change in unrealized appreciation (depreciation) on: Investments 11,178,828 ----------- Net realized and unrealized gain (loss) 19,897,742 ----------- Net Increase in Net Assets from Operations $21,130,009 ===========
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Statements of Changes in Net Assets --------------------------------------------------------------------------------
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income $ 1,232,267 $ 481,678 Net realized gain (loss) 8,718,914 3,865,493 Change in net unrealized appreciation (depreciation) 11,178,828 866,918 ------------- ------------ Net increase (decrease) in net assets from investment operations 21,130,009 5,214,089 ------------- ------------ Distributions to Shareholders (Note 1C) From net investment income (945,029) (480,413) From net realized gains on investments (4,041,460) (5,953,616) ------------- ------------ Total distributions to shareholders (4,986,489) (6,434,029) ------------- ------------ Fund Share Transactions (Note 4) Net proceeds from sale of shares 33,886,547 51,023,432 Value of shares issued in reinvestment of distributions 4,223,879 5,246,418 Cost of shares redeemed (25,407,412) (7,340,989) ------------- ------------ Net increase (decrease) in net assets from Fund share transactions 12,703,014 48,928,861 ------------- ------------ Total Increase (Decrease) in Net Assets 28,846,534 47,708,921 Net Assets At beginning of year 93,744,903 46,035,982 ------------- ------------ At end of year (including undistributed net investment income of $500,748 and $213,510) $ 122,591,437 $ 93,744,903 ============= ============
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, ----------------------------------------------------------- 2007 2006 2005 2004 2003 -------- ------- -------- -------- ------- Net Asset Value, Beginning of Year $ 37.58 $ 39.57 $ 35.24 $ 31.43 $ 26.13 -------- ------- -------- -------- ------- From Investment Operations: Net investment income * (a) 0.43 0.36 0.41 0.23 0.36 Net realized and unrealized gains (loss) on investments 7.01 3.22 4.28(b) 3.92(b) 5.30 -------- ------- -------- -------- ------- Total from operations 7.44 3.58 4.69 4.15 5.66 -------- ------- -------- -------- ------- Less Distributions to Shareholders: From net investment income (0.33) (0.39) (0.36) (0.34) (0.36) From net realized gains on investments (1.41) (5.18) -- -- -- -------- ------- -------- -------- ------- Total distributions to shareholders (1.74) (5.57) (0.36) (0.34) (0.36) -------- ------- -------- -------- ------- Net Asset Value, End of Year $ 43.28 $ 37.58 $ 39.57 $ 35.24 $ 31.43 ======== ======= ======== ======== ======= Total Return 20.27% 9.84%(c) 13.34% 13.23%(c) 21.76%(c) Ratios/Supplemental data: Expenses (to average daily net assets) * (d) 0.80% 0.90% 0.85% 0.83% 0.71% Net Investment Income (to average daily net assets)* 1.05% 0.98% 1.10% 0.67% 1.23% Portfolio Turnover (e) 59% 103% 85% 66% 104% Net Assets, End of Year (000's omitted) $122,591 $93,745 $46,036 $56,067 $64,150
-------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios without waivers and reimbursements would have been: Net investment income per share (a) N/A $ 0.33 N/A $ 0.23 $ 0.29 Ratios (to average daily net assets): Expenses (d) N/A 0.99% N/A 0.84% 0.93% Net investment income N/A 0.89% N/A 0.66% 1.01%
(a) Calculated based on average shares outstanding. (b) Amount includes litigation proceeds received by the Portfolio of $0.04 for the year ended September 30, 2007, $0.02 for the year ended September 30, 2005 and $0.02 for the year ended September 30, 2004. (c) Total return would have been lower in the absence of expense waivers. (d) For the period October 1, 2006 to September 19, 2007 and for the fiscal years ended September 30, 2003-2006, the ratio includes the Fund's share of the TBC Large Cap Core Portfolio's (the "Portfolio") allocated expenses. (e) On September 19, 2007, the Fund, which had owned 100% of the Portfolio on such date, withdrew entirely from the Portfolio and received the Portfolio's securities and cash in exchange for its interest in the Portfolio. Effective September 20, 2007, the Fund began investing directly in securities. Portfolio turnover represents investment activity of both the Fund and the Portfolio for the year. The amounts shown for 2003-2006 are the ratios for the Portfolio. The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Large Cap Core Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of companies that appear to be undervalued relative to underlying business fundamentals. The Fund focuses on companies with total market capitalizations which are greater than the market capitalization of companies in the bottom 5% of the S&P 500 Index. The Fund may invest without limit in securities of U.S. companies and of foreign companies that are listed or traded in the U.S., but not more than 10% of it assets in other foreign securities. Prior to September 20, 2007, the Fund had invested substantially all of its investable assets in The Boston Company Large Cap Core Portfolio (the "Portfolio"), a subtrust of the Mellon Institutional Funds Master Portfolio, a New York trust. The Portfolio had investment objectives, policies and limitations substantially identical to those of the Fund. On September 19, 2007, the Fund, which had owned 100% of the Portfolio on such date, withdrew entirely from the Portfolio and received the Portfolio's assets, including securities and cash, and assumed its stated liabilities, in exchange for its interests in the Portfolio. This redemption in kind transaction was effected based upon the net assets value of the Fund's interests in the Portfolio. Effective September 20, 2007, the Fund began investing directly in securities. Accordingly, the financial statements of the Fund and Portfolio have been presented on a consolidated basis, and represent all the activities of both the Fund and the Portfolio. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. 13 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Notes to Financial Statements -------------------------------------------------------------------------------- C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to TBCAM for overall investment advisory and administrative services and general office facilities is paid monthly at the annual rate of 0.50% of the Fund's average daily net assets. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $10,838, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $100,709 for the year ended September 30, 2007. 14 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $3,393 for the year ended September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. See Note 7 for further details. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $3,121, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $567, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $130,312 for fees payable to BNY Mellon Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ----------- ----------- Non-U.S. Government Securities $78,879,365 $67,941,124 =========== ===========
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 859,821 1,384,404 Shares issued to shareholders in reinvestment of 107,105 146,598 distributions Shares redeemed (628,855) (199,694) -------- --------- Net increase (decrease) 338,071 1,331,308 ======== =========
15 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Notes to Financial Statements -------------------------------------------------------------------------------- At September 30, 2007, two shareholders of record held in the aggregate 72% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund did not assess any redemption fees. (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact on the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $ 105,357,588 =============== Gross unrealized appreciation $ 18,601,505 Gross unrealized depreciation (1,848,357) --------------- Net unrealized appreciation (depreciation) $ 16,753,148 =============== Undistributed ordinary income $ 4,010,225 Undistributed capital gains 4,782,756 --------------- Total distributable earnings $ 8,792,981 ===============
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006, was as follows:
2007 2006 ---------- ---------- Ordinary income $1,833,219 $1,406,425 Capital Gains 3,153,270 5,027,604 ---------- ---------- Total Distributions $4,986,489 $6,434,029 ========== ==========
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: 16 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Notes to Financial Statements -------------------------------------------------------------------------------- Futures contracts The Fund may enter into financial futures contracts for the purchase or sale of securities, or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized appreciation or depreciation by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may also arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Fund enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At September 30, 2007, the Fund did not hold any open financial futures contracts. (7) Line of Credit: On behalf of the Fund, and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund had average borrowings outstanding of $815,154 for a total of twenty-six days and incurred $3,410 of interest expense. At September 30, 2007, the Fund did not have an outstanding loan balance. 17 Mellon Institutional Funds Investment Trust The Boston Company Large Cap Core Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of The Boston Company Large Cap Core Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company Large Cap Core Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 18 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Principal Name (Age) Term of Office Occupation(s) Address, and Position(s) and Length of During Past Date of Birth Held with Trust Time Served 5 Years ----------------------------------------------------------------------------------------------------------- Samuel C. Fleming (67) Trustee Trustee since 11/3/1986 Chairman Emeritus, 61 Meadowbrook Road Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since 9/13/1989 William Joseph Maier, c/o Harvard University Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since 11/3/1986 Trustee, Mertens P.O. Box 2333 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since 11/3/1986 Trustee, Essex Street c/o Essex Street Associates Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43 Number of Trustee Portfolios in Other Remuneration Name (Age) Fund Complex Directorships (period ended Address, and Overseen by Held by September 30, Date of Birth Trustee Trustee 2007) ------------------------------------------------------------------------------------- Samuel C. Fleming (67) 25 None Fund: $1,910 61 Meadowbrook Road Portfolio: $500 Weston, MA 02493 9/30/40 Benjamin M. Friedman (63) 25 None Fund: $1,910 c/o Harvard University Portfolio: $500 Littauer Center 127 Cambridge, MA 02138 8/5/44 John H. Hewitt (72) 25 None Fund: $1,910 P.O. Box 2333 Portfolio: $500 New London, NH 03257 4/11/35 Caleb Loring III (64) 25 None Fund: $1,993 c/o Essex Street Associates Portfolio: $500 P.O. Box 5600 Beverly, MA 01915 11/14/43
19 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Date of Birth Held with Trust Time Served ------------------------------------------------------------------------------- Barbara A. McCann (46) * President, Chief President and CEO BNY Mellon Asset Management Executive Officer since 2007; Secretary One Boston Place and Secretary since 2003 Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President BNY Mellon Asset Management Treasurer and since 1999; One Boston Place Chief Financial Treasurer Boston, MA 02108 Officer since 2002 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 BNY Mellon Asset Management President One Boston Place Boston, MA 02108 8/19/51 Mary T. Lomasney (50) Chief Compliance Since 2005 BNY Mellon Asset Management Officer One Boston Place Boston, MA 02108 4/8/57 Name (Age) Address, and Principal Occupation(s) Date of Birth During Past 5 Years ---------------------------------------------------------------------------------------- Barbara A. McCann (46) * Senior Vice President and Head of Operations, BNY Mellon Asset Management BNY Mellon Asset Management ("MAM"); formerly First One Boston Place Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President and Mutual Funds Controller, BNY Mellon Asset Management BNY Mellon Asset Management; formerly Assistant One Boston Place Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** First Vice President and Manager, Mutual Funds BNY Mellon Asset Management Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 20 THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6930AR0907 MELLON INSTITUTIONAL FUNDS Annual Report The Boston Company Small/Mid Cap Growth Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper typically viewed as the safest segment of the corporate market had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth around 2% GDP growth in 2008 vs. the 2.5% long-term trend is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability especially for multinational franchises as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Small/mid-cap stocks rallied early in the reporting period amid moderate economic growth, stable short-term interest rates and rising corporate earnings. At the time, investors maintained an ample appetite for risk, which benefited shares of smaller companies more than their larger counterparts. However, the market environment changed dramatically in mid-June 2007, when credit concerns in the sub-prime mortgage sector spread to other areas of the financial markets. In the ensuing market turbulence, newly risk-averse investors engaged in a "flight to quality", and larger, higher-quality companies returned to favor. The Federal Reserve Board attempted to improve market liquidity by reducing key short-term interest rates in August and September. These moves bolstered investor confidence that a recession could be avoided, sparking a market rally late in the reporting period. For the 12-month period ended September 30, 2007, The Boston Company Small/Mid Cap Growth Fund returned 26.31% as compared to the fund's benchmark, the Russell 2500 Growth Index, which returned 21.27% over the same period. The portfolio enjoyed strong relative returns from exposure to the Energy, Industrials, Consumer Staples, and Healthcare sectors. Within Energy, investments in both the equipment and services and the consumable fuels segments were strong contributors to performance, as strong stock selection led to significantly higher returns relative to the benchmark. Exploration and production companies such as Range Resources, Cabot Oil & Gas, and Penn Virginia Corp. were among the stronger performers, while equipment and services stocks FMC Technologies, Cameron International Corp., and W-H Energy Services led this segment higher. Healthcare also proved to be a relatively strong area for the portfolio, led by pharmaceuticals, equipment and supplies, and providers and services. Pharmaceuticals were driven by investments in Adams Respiratory Therapeutics and MGI Pharma, while within equipment and supplies, we benefited from investments in diversified diagnostic and medical device companies Cytyc Corp. and Viasys Healthcare Inc. Industrials continued to hold up well relative to the benchmark, benefiting from strength among our portfolio selections in the construction and engineering, distributors, and commercial services segments. Engineering and construction firms Foster Wheeler, Quanta services, and Washington Group International all surged during the period, the latter of which was acquired by URS Corporation. Conversely, the portfolio was negatively affected by exposure to the Financials and Information Technology sectors. With regard to Information Technology, the portfolio's investments in the software, computers and peripherals, and electronic equipment and instruments segments underperformed relative to the benchmark. Software services providers Amdocs Ltd, BEA Systems and Sybase Inc. led the relative decline in the software segment, while the portfolio also saw declines in scalable server manufacturer Rackable Systems, component manufacturer SMART Modular Technologies, and National Instruments Corp. Within the Financials sector, exposure to commercial banks and capital markets segments hurt portfolio performance as well. Commercial bank Capitol Bancorp suffered a decline as problems in their business in Great Lakes region could not be offset by strength in the their California business, compressing margins and hurting their earnings. Within capital markets, investment service firms Piper Jaffray Cos. and Jefferies Group Inc. both declined on profit concerns. As we move into the fourth quarter, we believe that the slower U.S. economy will continue to challenge our focus on uncovering companies that can grow in spite of this deceleration. We, as always, are sensitive to valuation and fundamentals that belie a company's ability to achieve and sustain growth. B. Randall Watts, Jr., CFA Todd Wakefield, CFA Portfolio Manager Portfolio Manager The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
2 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Comparison of change in value of $100,000 investment in The Boston Company Small / Mid Cap Growth Fund with the Russell 2500 Growth Index and the Russell 2000 Growth Index
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] TBC PERIOD Small / Mid Cap Growth Fund Russell 2000 Growth Index * Russell 2500 Growth Index * 9/30/97 100,000 100,000 100,000 12/31/97 89,993 91,804 91,994 3/31/98 102,007 102,712 102,247 6/30/98 94,858 96,813 97,259 9/30/98 72,783 75,166 75,661 12/31/98 91,535 92,933 94,845 3/31/99 97,754 91,372 93,846 6/30/99 107,112 104,845 109,617 9/30/99 104,820 99,690 105,814 12/31/99 163,944 132,980 147,466 3/31/00 201,773 145,324 169,804 6/30/00 183,247 134,611 158,071 9/30/00 175,723 129,263 153,425 12/31/00 132,341 103,153 123,738 3/31/01 104,237 87,470 99,096 6/30/01 124,048 103,193 120,169 9/30/01 93,871 74,215 87,634 12/31/01 111,839 93,634 110,333 3/31/02 111,148 91,799 107,076 6/30/02 98,824 77,391 89,268 9/30/02 81,777 60,738 72,250 12/31/02 85,814 65,299 78,232 3/31/03 82,013 62,767 75,728 6/30/03 97,794 77,923 92,933 9/30/03 109,312 86,080 102,198 12/31/03 125,438 96,997 114,465 3/31/04 135,460 102,411 120,766 6/30/04 135,114 102,506 120,928 9/30/04 129,700 96,345 114,148 12/31/04 148,015 110,874 131,165 3/31/05 142,601 103,306 125,490 6/30/05 148,476 106,900 129,955 9/30/05 159,418 113,654 138,130 12/31/05 160,801 115,478 141,888 3/31/06 178,194 132,064 158,666 6/30/06 171,168 122,489 148,948 9/30/06 171,859 120,337 147,157 12/31/06 183,644 130,890 159,289 3/31/07 192,003 134,130 165,715 6/30/07 210,687 143,101 177,291 9/30/07 217,079 143,123 178,452
Average Annual Total Returns (for period ended 9/30/2007) --------------------------------------------------------------------------------
Since Inception 1 Year 3 Years 5 Years 10 Years 1/1/1988** -------------------------------------------------------------------------------- Fund 26.31% 18.73% 21.56% 8.06% 13.88%
* Source: Lipper Inc. ** Combined Limited Partnership & Mutual Fund Performance Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 3 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 Actual $1,000.00 $1,130.60 $5.34 Hypothetical (5% return per year before expenses) $1,000.00 $1,020.05 $5.06
------- + Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 4 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments ---------------------------------------------------------------------------------------- NeuStar, Inc., Class A Telecommunication Services 2.1% Herbalife Ltd. Consumer Staples 2.1 Hologic, Inc. Heath Care 2.0 Respironics, Inc. Heath Care 1.7 PerkinElmer, Inc. Heath Care 1.7 Plum Creek Timber Co. Inc.-REIT Financials 1.7 Ritchie Bros. Auctioneers, Inc. Industrials 1.6 Waddell & Reed Financial, Inc., Class A Financials 1.6 VCA Antech, Inc. Heath Care 1.5 Bucyrus International, Inc., Class A Industrials 1.5 ----- 17.5%
* Excludes short-term securities and investment in cash collateral.
Percentage of Economic Sector Allocation Net Assets -------------------------------------------------------------------------------- Consumer Discretionary 16.0% Consumer Staples 8.6 Energy 9.5 Financials 12.5 Health Care 24.3 Industrials 15.2 Materials 8.8 Technology 31.9 Telecomunication Services 2.8 Utilities 1.0 Short-term and Other Assets (30.6) ------ 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--148.1% Equities--130.6% Consumer Discretionary--16.0% Bright Horizons Family Solutions, Inc. 9,080 (a) 388,987 DeVry, Inc. 3,970 146,930 Dollar Tree Stores, Inc. 8,100 (a,b) 328,374 Entravision Communications Corp., Class A 15,090 (a) 139,130 Guess?, Inc. 7,010 (b) 343,700 Interface, Inc., Class A 19,710 355,766 J.Crew Group, Inc. 2,140 (a,b) 88,810 Lions Gate Entertainment Corp. 31,588 (a) 325,672 Petsmart, Inc. 9,830 (b) 313,577 Steiner Leisure Ltd. 6,890 (a) 299,026 Texas Roadhouse, Inc., Class A 22,560 (a,b) 263,952 Tiffany & Co. 5,840 305,724 WMS Industries, Inc. 8,430 (a) 279,033 3,578,681 Consumer Staples--8.6% Hain Celestial Group, Inc. 7,480 (a,b) 240,332 Hansen Natural Corp. 4,320 (a) 244,858 Herbalife Ltd. 13,520 614,619 Inter Parfums, Inc. 11,180 264,631 Longs Drug Stores Corp. 6,700 332,789 Ruddick Corp. 6,820 228,743 1,925,972 Energy--9.5% Cameron International Corp. 1,540 (a) 142,127 CNX Gas Corp. 8,870 (a,b) 255,190 Denbury Resources, Inc. 8,000 (a) 357,520 FMC Technologies, Inc. 2,650 (a) 152,799 Overseas Shipholding Group, Inc. 2,340 179,782 Penn Virginia Corp. 9,490 417,370 Range Resources Corp. 9,850 400,501 W-H Energy Services, Inc. 3,020 (a) 222,725 2,128,014 Financials--12.5% Arch Capital Group Ltd. 5,520 (a) 410,743 GFI Group, Inc. 3,220 (a) 277,306 Max Capital Group Ltd. 11,260 315,730 OptionsXpress Holdings, Inc. 10,260 268,196 Plum Creek Timber Co., Inc.--REIT 10,990 491,912 Portfolio Recovery Associates, Inc. 2,760 (b) 146,473 Raymond James Financial, Inc. 6,480 212,868
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------- Financials (continued) RLI Corp. 3,950 224,044 Waddell & Reed Financial, Inc., Class A 16,800 454,104 2,801,376 Health Care--24.3% Arrow International, Inc. 5,870 267,026 Beckman Coulter, Inc. 4,360 (b) 321,594 Covance, Inc. 4,290 (a) 334,191 Cytyc Corp. 3,730 (a) 177,734 Dentsply International, Inc. 5,360 223,190 Exelixis, Inc. 17,410 (a) 184,372 Hologic, Inc. 9,690 (a) 591,090 Integra LifeSciences Holdings Corp. 4,430 (a) 215,209 MGI Pharma, Inc. 5,440 (a) 151,123 NuVasive, Inc. 2,700 (a,b) 97,011 PDL BioPharma, Inc. 11,590 (a,b) 250,460 Pediatrix Medical Group, Inc. 6,220 (a) 406,912 PerkinElmer, Inc. 17,050 498,031 Psychiatric Solutions, Inc. 9,560 (a) 375,517 Respironics, Inc. 10,427 (a) 500,809 Thermo Fisher Scientific, Inc. 5,440 (a) 313,997 TomoTherapy, Inc. 4,970 (a) 115,453 VCA Antech, Inc. 10,330 (a) 431,278 5,454,997 Industrials--15.2% AAR Corp. 5,220 (a) 158,375 Bucyrus International, Inc., Class A 5,870 428,099 Copart, Inc. 10,430 (a) 358,688 Foster Wheeler Ltd. 1,630 (a) 213,986 Hub Group, Inc., Class A Shares 6,970 (a) 209,309 Hubbell, Inc., Class B 6,080 347,290 MSC Industrial Direct Co. Inc., Class A 6,880 348,059 Quanta Services, Inc. 4,850 (a,b) 128,283 Ritchie Bros. Auctioneers, Inc. 7,340 477,834 Stericycle, Inc. 3,250 (a) 185,770 UAP Holding Corp. 7,390 231,750 URS Corp. 2,880 (a) 162,576 Washington Group International, Inc. 1,910 (a) 167,717 3,417,736 Materials--8.8% Aber Diamond Corp. 9,360 366,350 Airgas, Inc. 7,280 375,866 AptarGroup, Inc. 7,620 288,569
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------- Materials (continued) Kinross Gold Corp. 27,250 (a) 408,205 Schnitzer Steel Industries, Inc., Class A 2,500 183,225 Silver Wheaton Corp. 25,000 (a) 350,500 1,972,715 Technology-31.9% ADC Telecommunications, Inc. 4,870 (a) 95,501 Akamai Technologies, Inc. 6,720 (a,b) 193,066 AMIS Holdings, Inc. 15,130 (a) 146,912 Arris Group, Inc. 3,940 (a) 48,659 Atheros Communications, Inc. 6,320 (a) 189,410 BEA Systems, Inc. 13,880 (a) 192,516 BMC Software, Inc. 10,300 (a) 321,669 Business Objects SA-ADR 3,780 169,609 Citrix Systems, Inc. 6,330 (a) 255,226 Cognos, Inc. 6,030 (a) 250,426 Diodes, Inc. 6,905 (a) 221,650 Euronet Worldwide, Inc. 3,600 (a) 106,387 FLIR Systems, Inc. 5,650 (a) 312,954 Foundry Networks, Inc. 12,910 (a) 229,411 Global Payments, Inc. 8,870 392,231 Harris Corp. 2,760 159,500 Ingram Micro, Inc., Class A 12,430 (a) 243,752 Iron Mountain, Inc. 8,180 (a) 249,326 MasTec, Inc. 12,220 (a) 171,935 McAfee, Inc. 8,450 (a) 294,652 Microsemi Corp. 11,370 (a,b) 316,996 MPS Group, Inc. 7,110 (a) 79,277 Net Gear, Inc. 10,330 (a) 314,239 RF Micro Devices, Inc. 34,920 (a) 235,012 Solera Holdings, Inc. 19,670 (a) 353,863 Synopsys, Inc. 11,200 (a) 303,296 Tessera Technologies, Inc. 9,850 (a) 369,375 VeriFone Holdings, Inc. 7,570 (a,b) 335,578 Verisign, Inc. 10,550 (a,b) 355,957 Wright Express Corp. 7,230 (a) 263,823 7,172,208 Telecommunication Services-2.8% NeuStar, Inc., Class A 18,120 (a,b) 621,335 Utilities--1.0% Ormat Technologies, Inc. 4,790 221,969 Total Equities (cost $26,501,779) 29,295,003
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Par Value ($) Security Rate Maturity Value (Note 1A) ------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--0.3% U.S. Government--0.3% U.S. Treasury Bill (Cost $59,512) 3.90% 12/13/2007 60,000 (c,d) 59,556 INVESTMENT IN CASH COLLATERAL--17.2% BlackRock Cash Strategies L.L.C (Cost $3,858,175) 3,858,175 3,858,175 TOTAL UNAFFILIATED INVESTMENTS (Cost $30,419,466) 33,212,734 AFFILIATED INVESTMENT--12.5% Dreyfus Institutional Prefered Plus Money Market Fund (Cost $2,809,344) 2,809,344 (e) 2,809,344 ----------- TOTAL INVESTMENTS--160.6% (Cost $33,228,810) 36,022,078 LIABILITIES IN EXCESS OF OTHER ASSETS--(60.6%) (13,589,774) ----------- NET ASSETS-100.0% 22,432,304 ===========
Notes to Schedule of Investments: ADR--American Depository Receipt. REIT--Real Estate Investment Trust. (a) Non-income producing security. (b) Security, or a portion of thereof, was on loan at September 30, 2007. (c) Rate noted is yield to maturity. (d) Denotes all or part of security segregated as collateral for futures transactions. (e) Affiliated institutional money market fund. At September 30, 2007 the Fund held the following futures contracts:
Underlying Face Unrealized Contract Position Expiration Date Amount at Value (Loss) ----------------------------------------------------------------------------------------------------------- Russell 2000 Index (3 Contracts) Long 11/30/2007 $1,219,800 $ (442) =======
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Statement of Assets and Liabilities September 30, 2007 --------------------------------------------------------------------------------
Assets Investment in securities, at value (Note 1A) (including securities on loan, valued at $3,726,436 (Note 7)): Unaffiliated investments (cost $30,419,466) $33,212,734 Affiliated investments (Note 1F)(cost $2,809,344) 2,809,344 Cash collateral at broker for futures contracts 45,000 Receivable for investments sold 661,566 Receivable for Fund shares sold 228,638 Interest and dividends receivable 16,743 Prepaid expenses 12,605 ----------- Total assets 36,986,630 Liabilities Collateral for securities on loan (Note 7) $ 3,858,175 Payable for fund shares redeemed 7,985,583 Payable for investments purchased 2,637,781 Payable for variable margin on open futures contracts (Note 6) 13,961 Accrued professional fees 32,837 Accrued accounting, custody, administration and transfer agent fees (Note 2) 21,184 Accrued administrator service fees (Note 2) 1,427 Accrued trustees' fees (Note 2) 1,315 Accrued chief compliance officer fee (Note 2) 367 Accrued shareholder reporting expense (Note 2) 57 Other accrued expenses and liabilities 1,639 Total liabilities 14,554,326 ----------- Net Assets $22,432,304 =========== Net Assets consist of: Paid-in capital $15,967,559 Accumulated net realized gain 3,654,607 Undistributed net investment income 17,312 Net unrealized appreciation 2,792,826 ----------- Total Net Assets $22,432,304 =========== Shares of beneficial interest outstanding 1,270,441 =========== Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 17.66 ===========
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Statement of Operations For the Year Ended September 30, 2007
------------------------------------------------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments (net of foreign withholding taxes $1,065) $ 167,865 Dividend income from affiliated investments (Note 1F) 71,150 Interest income 8,316 Securities lending income (Note 7) 6,857 ----------- Total investment income 254,188 Expenses Investment advisory fee (Note 2) $ 142,123 Accounting, custody, administration and transfer agent fees (Note 2) 74,651 Professional fees 38,163 Registration fees 16,715 Trustees' fees and expenses (Note 2) 3,772 Administrative service fees (Note 2) 2,801 Insurance expense 2,190 Miscellaneous expenses 11,595 ---------- Total expenses 292,010 Deduct: Waiver of investment advisory fee (Note 2) (55,134) ---------- Net Expenses 236,876 ---------- Net investment income 17,312 ---------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 3,637,316 Financial futures transactions 46,439 ---------- Net realized gain (loss) 3,683,755 Change in unrealized appreciation (depreciation) on: Investments 1,756,374 Financial futures contracts 4,467 ---------- Net change in unrealized appreciation (depreciation) 1,760,841 ----------- Net realized and unrealized gain (loss) on investments 5,444,596 ----------- Net Increase in Net Assets from Operations $ 5,461,908 ===========
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Statements of Changes in Net Assets
---------------------------------------------------------------------------------------------------------------------------- For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 -------------------- -------------------- Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 17,312 $ (32,907) Net realized gain (loss) 3,683,755 3,538,082 Change in net unrealized appreciation (depreciation) 1,760,841 (1,959,349) Net increase from payments by affiliates -- 6,357 ------------ ----------- Net increase (decrease) in net assets from investment operations 5,461,908 1,552,183 ------------ ----------- Distributions to Shareholders (Note 1E) From net realized gains on investments (1,270,011) -- ------------ ----------- Total distributions to shareholders (1,270,011) -- ------------ ----------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 7,037,277 99,425 Value of shares issued to shareholders in reinvestment of distibutions 1,270,011 Cost of shares redeemed (net of redemption fees of $221 and $0, respectively) (10,455,435) (972,218) ------------ ----------- Net increase (decrease) in net assets from Fund share transactions (2,148,147) (872,793) ------------ ----------- Total Increase (Decrease) in Net Assets 2,043,750 679,390 Net Assets At beginning of year 20,388,554 19,709,164 ------------ ----------- At end of year (including undistributed net investment income of $17,312 and $0, respectively) $ 22,432,304 $20,388,554 ============ ===========
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, ------------------------------------------------------------------- 2007 2006 2005 2004 2003 -------- -------- ------- -------- ------- Net Asset Value, Beginning of Year $ 14.92 $ 13.84 $ 11.26 $ 9.48 $ 7.10 -------- -------- -------- -------- ------- From Operations: Net investment income (loss)*(a) 0.01 (0.02) (0.04) (0.08) (0.01) Net realized and unrealized gains (loss) on investments 3.74(b) 1.10 2.62 1.86(b) 2.39(b) Net increase from payments by affiliates - 0.00(c) - - - -------- -------- ------- -------- ------- Total from operations 3.75 1.08 2.58 1.78 2.38 -------- -------- ------- -------- ------- Less Distributions to Shareholders: From net investment income - - - - (0.00)(c) From net realized gains on investments (1.01) - - - - -------- -------- ------- -------- ------- Total distributions to shareholders (1.01) - - - (0.00)(c) -------- -------- ------- -------- ------- Net Asset Value, End of Year $ 17.66 $ 14.92 $ 13.84 $ 11.26 $ 9.48 ======== ======== ======== ======== ======= Total Return (d) 26.31% 7.80%(e) 22.91% 18.78% 33.54% Ratios/Supplemental data: Expenses (to average daily net assets)* 1.00% 1.00% 1.00% 0.98% 0.74% Net Investment Income (to average daily net assets)* 0.07% (0.16%) (0.32%) (0.69%) (0.17%) Portfolio Turnover 180% 161% 167% 157% 252% Net Assets, End of Year (000's omitted) $ 22,432 $ 20,389 $ 19,709 $ 19,222 $21,852
------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios, without waivers and reimbusement, would have been: Net investment income per share (a) $ (0.03) $ (0.07) $ (0.09) $ (0.12) $ (0.07) Ratios (to average daily net assets): Expenses 1.23% 1.29% 1.38% 1.33% 1.40% Net investment income (loss) (0.16%) (0.45%) (0.70%) (1.04%) (0.83%)
(a) Calculated using the average shares outstanding. (b) Amounts include litigation proceeds received by the Fund of $0.19 for the year ended September 30, 2007, $0.03 for the year ended September 30, 2004 and $0.01 for the year ended September 30, 2003 relating to securities litigation. (c) Calculates to less than $0.01 per share. (d) Total return would have been lower in the absence of expense waivers. (e) For the year ended September 30, 2006, 0.03% of the Fund's return consisted of a payment by the advisor to compensate the Fund for a trading error. Excluding this payment, total return was 7.77%. The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small/Mid Cap Growth Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of small cap and mid cap U.S. companies. The Fund focuses on companies with total market capitalizations equal to or less than the total market capitalization of the largest company included in the Russell 2500 Growth Index. The Fund may also invest in equity index futures based on the Russell 2000 and S&P Midcap indices, and exchange traded funds based upon the Russell 2500 Growth Index. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Funds net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to losses deferred due to wash sales and the timing of recognition of realized and unrealized gains and losses on futures contracts. Permanent book and tax basis differences relating to shareholder distributions result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 14 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to TBCAM for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 0.60% of the Fund's average daily net assets. TBCAM voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 1.00% of the Fund's average daily net assets for the year ended September 30, 2007. Pursuant to this arrangement, for the year ended September 30, 2007, TBCAM voluntarily waived a portion of its investment advisory fee in the amount of $55,134. This arrangement is voluntary and temporary and may be discontinued or revised by TBCAM at any time. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $7,511, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $67,140 for the year ended September 30, 2007. The Trust also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Funds lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, Mellon Bank earned $2,923 for the year ended September 30, 2007. See Note 7 for further details. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $860 for the year ended September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. See Note 8 for further details. 15 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,250, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $1,828, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $1,357 for fees paid to BNY Mellon Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ============= ============= Non-U.S. Government Securities $ 45,709,883 $ 40,801,248 ============= =============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 428,261 6,818 Shares issued to shareholders in reinvestment of distributions 84,274 - Shares redeemed (608,335) (64,826) --------- ------- Net increase (decrease) (95,800) (58,008) ========= ========
At September 30, 2007, two shareholders of record held in the aggregate 71.2% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than set brokerage commissions, market impact, and other costs associated with to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund charged $221 in redemption fees which is reflected in the cost of shares redeemed. 16 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $ 33,289,402 ============ Gross unrealized appreciation $ 3,013,019 Gross unrealized depreciation (280,343) ------------ Net unrealized appreciation (depreciation) $ 2,732,676 ============ Undistributed ordinary income $ 2,149,692 Undistributed capital gains 1,582,377 ------------ Total distributable earnings $ 3,732,069 ============
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006 was as follows:
2007 2006 ----------- --------- Ordinary income - - Capital gains $ 1,270,011 - =========== =========
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Futures contracts The Fund may enter into financial futures contracts for the purchase or sale of securities, or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized appreciation or depreciation by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may also arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Fund enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At September 30, 2007, the Fund held open financial futures contracts. See the Schedule of Investments for further details. 17 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- (7) Security Lending: The Fund may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $118,385 of which $111,528 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $3,726,436 on loan of which $3,858,175 was collateralized with cash and $10,945 was collateralized with highly liquid securities. See Schedule of Investments for further detail on the security positions on loan and collateral held. (8) Line of Credit: On behalf of the the Fund, and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund had average borrowings outstanding of $1,200,000 for a total of four days and incurred $767 of interest expense. At September 30, 2007, the Fund did not have a loan balance outstanding. 18 Mellon Institutional Funds Investment Trust The Boston Company Small/Mid Cap Growth Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of The Boston Company Small/Mid Cap Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company Small/Mid Cap Growth Fund (the Fund) at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 19 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $563 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $563 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $563 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $582 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees* None* * Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 20 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann (46)* President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56)** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 21 MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6928AR0907 MELLON INSTITUTIONAL FUNDS Annual Report The Boston Company Small Cap Growth Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Small-cap stocks rallied early in the reporting period amid moderate economic growth, stable short-term interest rates and rising corporate earnings. At the time, investors maintained an ample appetite for risk, which benefited shares of smaller companies more than their larger counterparts. However, the market environment changed dramatically in mid-June 2007, when credit concerns in the sub-prime mortgage sector spread to other areas of the financial markets. In the ensuing market turbulence, newly risk-averse investors engaged in a "flight to quality," and larger, higher-quality companies returned to favor. The Federal Reserve Board attempted to improve market liquidity by reducing key short-term interest rates in August and September. These moves bolstered investor confidence that a recession could be avoided, sparking a market rally late in the reporting period. For the 12-month period ended September 30, 2007, The Boston Company Small Cap Growth Fund returned 19.61% as compared to the fund's benchmark, the Russell 2000 Growth Index, which returned 18.94% over the same period. The fund enjoyed strong relative returns from exposure to the Energy, Healthcare, Industrials, and Materials sectors. Within Energy, investments in both the equipment and services and the consumable fuels segments were strong contributors to performance, as strong stock selection led to significantly higher returns relative to the benchmark. Exploration and production companies such as Arena Resources, Cabot Oil & Gas, and Penn Virginia Corp. were among the stronger performers, while equipment and services stocks W-H Energy Services, T-3 Energy Services, and Oil States led this group higher. Healthcare also proved to be a relatively strong area for the portfolio, led by pharmaceuticals, biotechnology, and equipment and suppliers. Sirtris Pharmaceuticals, Inc., a biopharmaceutical company, enjoyed strong returns as the company has had success with emerging treatments for aging and effects thereof. Within equipment and supplies, we benefited from investments in diversified diagnostic and medical device companies Cytyc Corp. and Viasys Healthcare Inc., as well as, biotechnology companies Sima Therapeutics, InterMune Inc., and Sangamo BioSciences, Inc. Industrials continued to hold up well relative to the benchmark, benefiting from strength among our portfolio selections in the electrical equipment, commercial services, and transportation infrastructure segments, while our Materials investments rose sharply on continued strength in the metal commodities and agriculture chemicals due to the ethanol push which has driven corn harvesting to an all-time high. Conversely, the portfolio was affected negatively by exposure to the Information Technology and Consumer Discretionary sectors. With regard to Information Technology, the portfolio's investments in the semiconductors, computers and peripherals, and software segments underperformed relative to the benchmark. Rudolph Technologies, a provider of process control metrology and data analysis systems for the semiconductor industry, fell as weakness in demand from memory manufacturers hurt revenues. The portfolio also saw declines in high performance chip and software provider Ikanos Communications, scalable server manufacturer Rackable Systems, and business software provider BEA Systems. Within the Consumer Discretionary sector, exposure to the catalog/internet retail area hurt on a relative basis as this was among the best performing segments within the sector for the Index and our investments in US Auto Parts Network and Shutterfly Inc. declined. As we move into the fourth quarter, we believe that the slower U.S. economy will continue to challenge our focus on uncovering companies that can grow in spite of this deceleration. We, as always, are sensitive to valuation and fundamentals that belie a company's ability to achieve and sustain growth. B. Randall Watts, Jr., CFA P. Hans von der Luft Portfolio Manager Portfolio Manager The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
2 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Comparison of Change in Value of $100,000 Investment in The Boston Company Small Cap Growth Fund and the Russell 2000 Growth Index (Unaudited) -------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
TBC PERIOD Small Cap Growth Fund Russell 2000 Growth Index * 9/30/97 100,000 100,000 12/31/97 91,558 91,804 3/31/98 106,275 102,712 6/30/98 101,098 96,813 9/30/98 82,165 75,166 12/31/98 104,648 92,933 3/31/99 122,730 91,372 6/30/99 139,925 104,845 9/30/99 141,441 99,690 12/31/99 238,250 132,980 3/31/00 278,603 145,324 6/30/00 258,785 134,611 9/30/00 242,716 129,263 12/31/00 189,023 103,153 3/31/01 151,563 87,470 6/30/01 175,887 103,193 9/30/01 132,629 74,215 12/31/01 155,458 93,634 3/31/02 153,963 91,799 6/30/02 135,437 77,391 9/30/02 112,290 60,738 12/31/02 116,141 65,299 3/31/03 111,385 62,767 6/30/03 133,671 77,923 9/30/03 146,852 86,080 12/31/03 168,685 96,997 3/31/04 180,915 102,411 6/30/04 179,692 102,506 9/30/04 171,901 96,345 12/31/04 194,776 110,874 3/31/05 187,211 103,306 6/30/05 195,274 106,900 9/30/05 209,724 113,654 12/31/05 211,037 115,478 3/31/06 235,815 132,064 6/30/06 224,717 122,489 9/30/06 225,079 120,337 12/31/06 244,149 130,890 3/31/07 247,818 134,130 6/30/07 265,393 143,101 9/30/07 269,108 143,123
Average Annual Total Returns (for period ended 9/30/2007) -------------------------------------------------------------------------------- Since Inception 1 Year 3 Years 5 Years 10 Years 12/23/1996 -------------------------------------------------------------------------------- Fund 19.61% 16.11% 19.11% 10.41% 13.52%
* Source: Lipper Inc. Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 3 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 --------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,085.70 $5.70 Hypothetical (5% return per year before expenses) $1,000.00 $1,019.55 $5.57
-------- + Expenses are equal to the Fund's annualized expense ratio of 1.10%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 4 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments ---------------------------------------------------------------------------------------------- Respironics, Inc. Health Care 1.8% Hologic, Inc. Health Care 1.7 Wright Medical Group, Inc. Health Care 1.6 NeuStar, Inc., Class A Telecommunication Services 1.5 Bucyrus International, Inc., Class A Industrials 1.5 Penn Virginia Corp. Energy 1.5 Bright Horizons Family Solutions, Inc. Consumer Discretionary 1.4 Pediatrix Medical Group, Inc. Health Care 1.4 Psychiatric Solutions, Inc. Health Care 1.3 Copart, Inc. Industrials 1.3 ---- 15.0%
* Excludes short-term securities and investment of cash collateral.
Percentage of Economic Sector Allocation Net Assets -------------------------------------------------------------------------------- Consumer Discretionary 11.3% Consumer Staples 4.8 Energy 6.7 Financials 7.6 Health Care 22.4 Industrials 12.3 Materials 5.3 Technology 22.8 Telecommunication Service 1.4 Utilities 0.8 Short-term and Other Assets 4.6 ----- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--118.3% Equities--95.4% Consumer Discretionary--11.3% Bright Horizons Family Solutions, Inc. 58,670 (a) 2,513,423 DeVry, Inc. 24,710 914,517 Entravision Communications Corp., Class A 111,610 (a,b) 1,029,044 Iconix Brand Group, Inc. 70,460 (a) 1,676,243 Interface, Inc., Class A 126,420 2,281,881 J.Crew Group, Inc. 13,970 (a,b) 579,755 Lions Gate Entertainment Corp. 202,380 (a) 2,086,538 Pacific Sunwear of California, Inc. 92,590 (a) 1,370,332 Red Robin Gourmet Burgers, Inc. 33,490 (a) 1,436,721 Skechers USA, Inc., Class A 44,520 (a,b) 983,892 Steiner Leisure Ltd. 47,290 (a) 2,052,386 Texas Roadhouse, Inc., Class A 159,330 (a,b) 1,864,161 True Religion Apparel, Inc. 63,520 (a,b) 1,117,952 WMS Industries, Inc. 36,020 (a,b) 1,192,262 21,099,107 Consumer Staples--4.8% Hain Celestial Group, Inc. 47,420 (a,b) 1,523,605 Hansen Natural Corp. 26,760 (a) 1,516,757 Inter Parfums, Inc. 69,370 (b) 1,641,988 Longs Drug Stores Corp. 44,730 2,221,739 Nu Skin Enterprises, Inc., Class A 63,200 1,021,312 Ruddick Corp. 31,220 1,047,119 8,972,520 Energy--6.7% Alpha Natural Resources, Inc. 55,000 (a) 1,277,650 Berry Petroleum Co., Class A 36,030 (b) 1,426,428 Dril-Quip, Inc. 11,470 (a) 566,044 Oil States International, Inc. 25,630 (a,b) 1,237,929 Overseas Shipholding Group, Inc. 14,770 1,134,779 Parallel Petroleum Corp. 68,210 (a,b) 1,158,888 Penn Virginia Corp. 59,260 2,606,255 T-3 Energy Services, Inc. 40,590 (a) 1,730,758 W-H Energy Services, Inc. 18,700 (a) 1,379,125 12,517,856 Financials--7.6% Arch Capital Group Ltd. 23,610 (a) 1,756,820 First Cash Financial Services, Inc. 66,650 (a) 1,560,943
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------- Financials (continued) First Mercury Financial Corp. 72,360 (a) 1,556,464 GFI Group, Inc. 13,100 (a,b) 1,128,172 Hallmark Financial Services, Inc. 35,660 (a) 501,023 Max Capital Group Ltd. 43,790 1,227,872 Montpelier Re Holdings Ltd. 64,290 1,137,933 OptionsXpress Holdings, Inc. 65,540 1,713,216 Portfolio Recovery Associates, Inc. 17,740 (b) 941,462 RLI Corp. 16,910 959,135 Waddell & Reed Financial, Inc., Class A 67,620 1,827,769 14,310,809 Health Care--22.4% Amedisys, Inc. 31,180 (a) 1,197,936 Applera Corp.- Celera Genomics Group 76,080 (a,b) 1,069,685 Array Biopharma, Inc. 70,750 (a,b) 794,523 Arrow International, Inc. 34,920 1,588,511 Covance, Inc. 23,010 (a) 1,792,479 Cytyc Corp. 24,840 (a) 1,183,626 Dexcom, Inc. 23,440 (a,b) 234,166 Enzon Pharmaceuticals, Inc. 137,100 (a,b) 1,207,851 Exelixis, Inc. 110,810 (a,b) 1,173,478 Hologic, Inc. 50,140 (a,b) 3,058,540 Integra LifeSciences Holdings Corp. 27,590 (a,b) 1,340,322 MGI Pharma, Inc. 33,630 (a) 934,241 Natus Medical, Inc. 139,810 (a,b) 2,228,571 NuVasive, Inc. 17,500 (a,b) 628,775 NxStage Medical, Inc. 42,250 (a) 612,202 Pediatrix Medical Group, Inc. 38,230 (a) 2,501,007 PerkinElmer, Inc. 65,280 1,906,829 Phase Forward, Inc. 55,050 (a) 1,101,550 Poniard Pharmaceuticals, Inc. 101,930 (a,b) 577,943 Psychiatric Solutions, Inc. 60,940 (a) 2,393,723 Respironics, Inc. 66,250 (a) 3,181,987 Sangamo Biosciences, Inc. 53,980 (a,b) 761,658 Sirtris Pharmaceuticals, Inc. 64,690 (a,b) 1,104,905 Thermo Fisher Scientific, Inc. 38,490 (a) 2,221,643 Thoratec Corp. 73,480 (a,b) 1,520,301 TomoTherapy, Inc. 32,330 (a) 751,026 VCA Antech, Inc. 48,690 (a) 2,032,807 Wright Medical Group, Inc. 103,330 (a,b) 2,771,311 41,871,596
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------- Industrials--12.3% AAR Corp. 32,800 (a) 995,152 Bucyrus International, Inc., Class A 37,040 2,701,327 Copart, Inc. 68,840 (a) 2,367,408 Endeavor Acquisition Corp. 50,390 (a,b) 597,121 Hub Group, Inc., Class A 43,900 (a,b) 1,318,317 Hurco Companies, Inc. 12,850 (a) 694,671 McGrath RentCorp. 49,810 (b) 1,655,684 MSC Industrial Direct Co. Inc., Class A 43,880 2,219,889 OceanFreight, Inc. 27,160 631,198 Quanta Services, Inc. 30,600 (a,b) 809,370 Ritchie Bros. Auctioneers, Inc. 33,210 2,161,971 Stanley, Inc. 66,930 (a) 1,843,921 Stericycle, Inc. 20,560 (a) 1,175,210 UAP Holding Corp. 47,450 (b) 1,488,032 URS Corp. 9,210 (a) 519,904 Washington Group International, Inc. 21,530 (a,b) 1,890,549 23,069,724 Materials--5.3% American Vanguard Corp. 47,910 (b) 935,203 Century Aluminum Co. 42,310 (a,b) 2,227,622 Flotek Industries, Inc. 12,390 (a) 547,018 H.B. Fuller Co. 36,570 1,085,398 Horsehead Holding Corp. 28,350 (a) 635,607 Kinross Gold Corp. 71,110 (a) 1,065,228 Schnitzer Steel Industries, Inc., Class A 15,470 (b) 1,133,796 Silver Wheaton Corp. 157,600 (a,b) 2,209,552 9,839,424 Technology--22.8% ADC Telecommunications, Inc. 29,130 (a) 571,239 AMIS Holdings, Inc. 94,220 (a) 914,876 Arris Group, Inc. 24,570 (a) 303,440 Atheros Communications, Inc. 39,350 (a,b) 1,179,320 Bankrate, Inc. 25,730 (a,b) 1,186,668 ChipMOS TECHNOLOGIES (Bermuda) Ltd. 183,680 (a,b) 1,100,243 Dice Holdings, Inc. 4,100 (a) 42,148 Diodes, Inc. 42,745 (a,b) 1,372,114 DivX, Inc. 48,260 (a) 717,626 Epicor Software Corp. 79,640 (a,b) 1,096,643 Euronet Worldwide, Inc. 15,000 (a) 443,280
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------- Technology (continued) FLIR Systems, Inc. 25,060 (a,b) 1,388,073 Forrester Research, Inc. 41,280 (a) 972,970 Foundry Networks, Inc. 82,190 (a) 1,460,516 Informatica Corp. 130,280 (a) 2,045,396 Internap Network Services Corp. 79,900 (a,b) 1,132,183 Intervoice, Inc. 109,730 (a,b) 1,030,365 Lawson software, Inc. 95,890 (a,b) 959,859 MasTec, Inc. 75,840 (a,b) 1,067,069 Microsemi Corp. 71,560 (a,b) 1,995,093 MIPS Technologies, Inc. 122,710 (a,b) 969,409 MPS Group, Inc. 35,990 (a) 401,288 Net Gear, Inc. 63,670 (a,b) 1,936,841 Netscout Systems, Inc. 146,240 (a) 1,594,016 Online Resources Corp. 58,300 (a) 736,912 OpNext, Inc. 77,180 (a) 895,288 QAD, Inc. 60,620 (b) 524,969 RealNetworks, Inc. 235,210 (a) 1,594,724 RF Micro Devices, Inc. 216,770 (a) 1,458,862 SkillSoft PLC ADR 70,620 (a) 634,874 Solera Holdings, Inc. 100,040 (a) 1,799,720 Tech Data Corp. 26,860 (a) 1,077,623 Tessera Technologies, Inc. 61,000 (a) 2,287,500 The Ultimate Software Group, Inc. 29,470 (a,b) 1,028,503 TheStreet.com, Inc. 59,190 716,791 Trident Microsystems, Inc. 42,050 (a) 668,175 TriQuint Semiconductor, Inc. 159,130 (a) 781,328 Virtusa Corp. 41,850 (a) 627,750 Wright Express Corp. 50,580 (a,b) 1,845,664 42,559,358 Telecommunication Services--1.4% NeuStar, Inc., Class A 80,440 (a,b) 2,758,288 Utilities--0.8% Ormat Technologies, Inc. 31,260 1,448,588 Total Equities (Cost $166,097,456) 178,447,270
SHORT-TERM INVESTMENTS--0.3% Rate Maturity Par Value ---- -------- --------- U.S. Government--0.3% U.S. Treasury Bill (Cost $505,856) 3.90% 12/13/2007 510,000 (c,d) 506,227
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------- INVESTMENT OF CASH COLLATERAL--22.6% BlackRock Cash Strategies L.L.C. (Cost $42,170,562) 42,170,562 42,170,562 TOTAL UNAFFILIATED INVESTMENTS (Cost $208,773,874) 221,124,059 AFFILIATED INVESTMENTS--10.1% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $18,951,731) 18,951,731 (e) 18,951,731 ----------- TOTAL INVESTMENTS--128.4% (Cost $227,725,605) 240,075,790 LIABILITIES IN EXCESS OF OTHER ASSETS--(28.4%) (53,085,249) ----------- NET ASSETS--100% 186,990,541 ===========
Notes to Schedule of Investments: ADR--American Depository Receipt a Non-income producing security. b Security, or a portion of thereof, was on loan at September 30, 2007. c Denotes all or part of security segregated as collateral for futures transactions. d Rate noted is yield to maturity. e Affiliated institutional money market fund. At September 30, 2007 the fund held the following futures contracts:
Underlying Face Unrealized Contract Position Expiration Date Amount at Value Appreciation ----------------------------------------------------------------------------------------------------------- Russell 2000 Index (17 Contracts) Long 11/30/2007 $6,912,200 $ 9,001 =======
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investments in securities (Note 1A) (including securities on loan, valued at $39,905,520 (Note 7)) Unaffiliated issuers, at value (cost $208,773,874) $221,124,059 Affiliated issuers, at value (Note 1F) (cost $18,951,731) 18,951,731 Cash collateral at broker for futures contracts 205,000 Receivable for investments sold 4,291,977 Receivable for Fund shares sold 504,089 Interest and dividends receivable 99,847 Prepaid expenses 12,693 ------------ Total assets 245,189,396 Liabilities Collateral for securities on loan (Note 7) $42,170,562 Payable for investments purchased 15,697,382 Payable for Fund shares redeemed 123,809 Payable for variation margin on open futures contracts (Note 6) 90,532 Accrued accounting, administration, custody and transfer agent fees (Note 2) 43,307 Accrued professional fees 33,509 Accrued administrator service fees (Note 2) 32,426 Accrued trustees' fees and expenses (Note 2) 4,047 Accrued chief compliance officer fee (Note 2) 367 Other accrued expenses and liabilities 2,914 - ----------- Total liabilities 58,198,855 ------------ Net Assets $186,990,541 ============ Net Assets consist of: Paid-in capital $177,642,977 Accumulated net realized loss (3,011,622) Net unrealized appreciation 12,359,186 ------------ Total Net Assets $186,990,541 ============ Shares of beneficial interest outstanding 3,147,367 ============ Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 59.41 ============
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Statement of Operations For the Year Ended September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments (net of foreign withholding taxes of $1,567) $ 354,920 Dividend income from affiliated investments (Note 1F) 447,500 Securities lending income (Note 7) 122,749 Interest income 13,823 ----------- Total investment Income 938,992 Expenses Investment advisory fee (Note 2) $ 840,178 Accounting, administration, custody and transfer agent fees (Note 2) 149,404 Administrative service fees (Note 2) 70,755 Professional fees 42,517 Registration fees 18,040 Trustees' fees and expenses (Note 2) 10,641 Insurance expense 3,515 Miscellaneous expenses 18,819 ---------- Total Expenses 1,153,869 ----------- Net investment loss (214,877) ----------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 6,906,151 Financial futures transactions (608,789) ---------- Net realized gain (loss) 6,297,362 Change in unrealized appreciation (depreciation) on: Investments 9,849,143 Financial futures contracts 15,160 ---------- Change in net unrealized appreciation (depreciation) 9,864,303 ----------- Net realized and unrealized gain (loss) 16,161,665 ----------- Net Increase in Net Assets from Operations $15,946,788 =========== The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Statements of Changes in Net Assets -------------------------------------------------------------------------------- For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ (214,877) $ (112,295) Net realized gain (loss) 6,297,362 6,830,406 Change in net unrealized appreciation (depreciation) 9,864,303 (4,066,139) ------------- ------------- Net increase (decrease) in net assets from operations 15,946,788 2,651,972 ------------- ------------- Capital Transactions Net proceeds from sale of shares 146,946,424 11,509,182 Cost of shares redeemed (net of redemption fees of $9,445 and $3,100, respectively) (18,005,464) (8,381,712) ------------- ------------- Net increase (decrease) in net assets from Fund share transactions 128,940,960 3,127,470 ------------- ------------- Total Increase (Decrease) in Net Assets 144,887,748 5,779,442 Net Assets At beginning of year 42,102,793 36,323,351 ------------- ------------- At end of year $ 186,990,541 $ 42,102,793 ============= =============
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, ------------------------------------------------------------ 2007 2006 2005 2004(a) 2003(a) -------- ------- ------- ------- ------- Net Asset Value, Beginning of Year $ 49.67 $ 46.30 $ 37.95 $ 32.41 $ 24.78 -------- ------- ------- ------- ------- From Investment Operations: Net investment income (loss)* (b) (0.11) (0.14) (0.20) (0.33) (0.11) Net realized and unrealized gains (loss) on investments 9.85(c) 3.51 8.55 5.87(c) 7.74(c) -------- ------- ------- ------- ------- Total from operations 9.74 3.37 8.35 5.54 7.63 -------- ------- ------- ------- ------- Net Asset Value, End of Year $ 59.41 $ 49.67 $ 46.30 $ 37.95 $ 32.41 ======== ======= ======= ======= ======= Total Return (d) 19.61% 7.28% 22.00% 17.09% 30.79% Ratios/Supplemental data: Expenses (to average daily net assets)* (e) 1.09% 1.10% 1.17% 1.18% 1.00% Net Investment Income (Loss)(to average daily net assets)* (0.20)% (0.30)% (0.48)% (0.87)% (0.42)% Portfolio Turnover (f) 175%(f) 166% 135% 153% 261% Net Assets, End of Year (000's omitted) $186,991 $42,103 $36,323 $18,274 $21,168 -------- * The investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios, without waivers and reimbursement, would have been: Net investment income (loss) per share N/A $(0.28) $ (0.31) $ (0.40) $ (0.30) Ratios (to average daily net assets): Expenses (e) N/A 1.38% 1.41% 1.37% 1.66% Net investment income (loss) N/A (0.58)% (0.72)% (1.06)% (1.08)%
(a) Prior to August 31, 2005, the Fund offered two classes of shares: Institutional Class and Service Class. The financial highlights for periods prior to the year ended September 30, 2005, represent those of the Institutional Class. (b) Calculated based on average shares outstanding. (c) Amounts include litigation proceeds received by the Fund of $0.01 for the year ended September 30, 2007, $0.06 for the year ended September 30, 2004 and less than $0.01 for the year ended September 30, 2003. (d) Total return would have been lower in the absence of expense waivers. (e) For the period October 1, 2006 to September 19, 2007 and for the fiscal years ended September 30, 2003-2006, the ratio includes the Fund's share of the TBC Small Cap Growth Portfolio's (the "Portfolio") allocated expenses. (f) On September 19, 2007, the Fund, which had owned 100% of the Portfolio on such date, withdrew entirely from the Portfolio and received the Portfolio's securities and cash in exchange for its interests in the Portfolio. Effective September 20, 2007, the Fund began investing directly in the securities in which the Portfolio had invested. Portfolio turnover represents investment activity of both the fund and the Portfolio for the year. The amounts shown for 2003-2006 are the ratios for the Portfolio. The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Cap Growth Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of its net assets in equity securities of small cap U.S. companies. The Fund focuses on companies with total market capitalizations equal to or less than the total market capitalization of the largest company included in the Russell 2000 Growth Index. The Fund may also invest in equity index futures contracts based primarily upon the Russell 2000 Index. Prior to September 20, 2007, the Fund had invested substantially all of its investable assets in The Boston Company Small Cap Growth Portfolio (the "Portfolio"), a subtrust of the Mellon Institutional Funds Master Portfolio, a New York trust. The Portfolio had investment objectives, policies and limitations substantially identical to those of the Fund. On September 19, 2007, the Fund, which had owned 100% of the Portfolio on such date, withdrew entirely from the Portfolio and received the Portfolio's assets, including securities and cash, and assumed its stated liabilities, in exchange for its interests in the Portfolio. This redemption in kind transaction was effected based upon the net assets value of the Fund's interest in the portfolio. Effective September 20, 2007, the Fund began investing directly in securities. Accordingly, the financial statements of the Fund and Portfolio have been presented on a consolidated basis, and represent all the activities of both the Fund and the Portfolio. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences which may result in reclassifications, are primarily due to losses deferred due to wash sales, capital loss carryovers and the timing of recognition of realized and unrealized gains and losses on futures contracts. 15 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New Accounting Requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to TBCAM for overall investment advisory and administrative services and general office facilities is paid monthly at the annual rate of 0.80% of the Fund's average daily net assets. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $11,331, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $138,073 for the year ended September 30, 2007. The Trust also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, the Fund was charged $52,515 for the year ended September 30, 2007. See Note 7 for further details. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $188 for the year ended September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. See Note 8 for further details. 16 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,250, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $3,780, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $15,210 for fees payable to BNY Mellon Private Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ------------ ------------ Non-U.S. Government Securities $292,521,409 $171,082,941 ============ ============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 2,620,743 237,244 Shares redeemed (321,030) (174,108) --------- ------ Net increase (decrease) 2,299,713 63,136 ========= ======
At September 30, 2007, three shareholders of record held in the aggregate 63.5% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund received $9,445 in redemption fees which are reflected in the cost of shares redeemed. 17 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $228,047,067 ============ Gross unrealized appreciation $ 15,080,325 Gross unrealized depreciation (3,051,602) ------------ Net unrealized appreciation (depreciation) $ 12,028,723 ============
At September 30, 2007, the Fund, for federal income tax purposes, has capital loss carryovers which will reduce the Fund's taxable income arising from net realized gain on investment, if any, to the extent permitted by the Internal Revenue Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Such capital loss carryovers are as follows:
Capital Loss Carry Over Expiration Date ---------- --------------- $ 384,833 9/30/2010 $2,296,326 9/30/2011
It is uncertain whether the Fund will be able to realize the benefits of the losses before they expire. For the year ended September 30, 2007, the Fund utilized $6,562,115 in capital loss carry forwards. (6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Futures contracts The Fund may enter into financial futures contracts for the purchase or sale of securities, or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized appreciation or depreciation by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may also arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Fund enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. 18 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Notes to Financial Statements -------------------------------------------------------------------------------- At September 30, 2007, the Fund held open financial futures contracts. See the Schedule of Investments for further details. (7) Security Lending: The Fund may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $1,173,473 of which $1,050,724 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $39,905,520 on loan. See Schedule of Investments for further detail on the security positions on loan and collateral held. (8) Line of Credit: On behalf of the Fund and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. For the year ended September 30, 2007, the Fund did not borrow from the line of credit. 19 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Growth Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of The Boston Company Small Cap Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company Small Cap Growth Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 20 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $793 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $500 Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $793 c/o Harvard University 9/13/1989 Professor of Political Portfolio: $500 Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $793 P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $500 New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $840 c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $500 P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None * * Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 21 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 22 THIS PAGE INTENTIONALLY LEFT BLANK 23 THIS PAGE INTENTIONALLY LEFT BLANK 24 THIS PAGE INTENTIONALLY LEFT BLANK 25 MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6941AR0907 MELLON INSTITUTIONAL FUNDS The Boston Company Annual Report Small Cap Tax-Sensitive Equity Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Small-cap stocks rallied early in the reporting period amid moderate economic growth, stable short-term interest rates and rising corporate earnings. At the time, investors maintained an ample appetite for risk, which benefited shares of smaller companies more than their larger counterparts. However, the market environment changed dramatically in mid-June 2007, when credit concerns in the sub-prime mortgage sector spread to other areas of the financial markets. In the ensuing market turbulence, newly risk-averse investors engaged in a "flight to quality," and larger, higher-quality companies returned to favor. The Federal Reserve Board attempted to improve market liquidity by reducing key short-term interest rates in August and September. These moves bolstered investor confidence that a recession could be avoided, sparking a market rally late in the reporting period. For the 12-month period ended September 30, 2007, The Boston Company Small Cap Tax-Sensitive Equity Fund returned 20.79% as compared to the fund's benchmark, the Russell 2000 Growth Index, which returned 18.94% over the same period. The portfolio enjoyed strong relative returns from exposure to the Energy, Healthcare, Industrials, and Materials sectors. Within Energy, investments in both the equipment and services and the consumable fuels segments were strong contributors to performance, as strong stock selection led to significantly higher returns relative to the benchmark. Exploration and production companies such as Arena Resources, Cabot Oil & Gas, and Penn Virginia Corp. were among the stronger performers, while equipment and services stocks W-H Energy Services, T-3 Energy Services, and Oil States led this group higher. Healthcare also proved to be a relatively strong area for the portfolio, led by pharmaceuticals, biotechnology, and equipment and suppliers. Sirtris Pharmaceuticals, Inc., a biopharmaceutical company, enjoyed strong returns as the company has had success with emerging treatments for aging and effects thereof. Within equipment and supplies, we benefited from investments in diversified diagnostic and medical device companies Cytyc Corp. and Viasys Healthcare Inc., as well as, biotechnology companies Sima Therapeutics, InterMune Inc., and Sangamo BioSciences, Inc. Industrials continued to hold up well relative to the benchmark, benefiting from strength among our portfolio selections in the electrical equipment, commercial services, and transportation infrastructure segments, while our Materials investments rose sharply on continued strength in the metal commodities and agriculture chemicals due to the ethanol push which has driven corn harvesting to an all-time high. Conversely, the portfolio was negatively affected by exposure to the Information Technology and Consumer Discretionary sectors. With regard to Information Technology, the portfolio's investments in the semiconductors, computers and peripherals, and software segments underperformed relative to the benchmark. Rudolph Technologies, a provider of process control metrology and data analysis systems for the semiconductor industry, fell as weakness in demand from memory manufacturers hurt revenues. The 2 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Management Discussion and Analysis -------------------------------------------------------------------------------- portfolio also saw declines in high performance chip and software provider Ikanos Communications, scalable server manufacturer Rackable Systems, and business software provider BEA Systems. Within the Consumer Discretionary sector, exposure to the catalog/internet retail area hurt on a relative basis as this was among the best performing segments within the sector for the Index and our investments in US Auto Parts Network and Shutterfly Inc. declined. As we move into the fourth quarter, we believe that the slower U.S. economy will continue to challenge our focus on uncovering companies that can grow in spite of this deceleration. We, as always, are sensitive to valuation and fundamentals that belie a company's ability to achieve and sustain growth. B. Randall Watts, Jr. CFA Todd W. Wakefield, CFA Portfolio Manger Portfolio Manger The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
3 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Comparison of Change in Value of $100,000 Investment in The Boston Company Small Cap Tax-Sensitive Equity Fund and Russell 2000 Growth Index (Unaudited) --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] TBC PERIOD Small Cap Tax-Sensitive Equity Russell 2000 Growth Index * 9/30/97 100,000 100,000 12/31/97 91,734 91,804 3/31/98 103,016 102,712 6/30/98 100,242 96,813 9/30/98 79,836 75,166 12/31/98 101,505 92,933 3/31/99 114,328 91,372 6/30/99 126,627 104,845 9/30/99 125,364 99,690 12/31/99 203,698 132,980 3/31/00 250,549 145,324 6/30/00 230,809 134,611 9/30/00 233,423 129,263 12/31/00 175,622 103,153 3/31/01 133,369 87,470 6/30/01 154,719 103,193 9/30/01 117,156 74,215 12/31/01 137,523 93,634 3/31/02 136,629 91,799 6/30/02 120,863 77,391 9/30/02 100,674 60,738 12/31/02 104,515 65,299 3/31/03 100,228 62,767 6/30/03 120,371 77,923 9/30/03 132,163 86,080 12/31/03 151,905 96,997 3/31/04 163,116 102,411 6/30/04 161,910 102,506 9/30/04 155,031 96,345 12/31/04 175,622 110,874 3/31/05 168,743 103,306 6/30/05 175,934 106,900 9/30/05 189,155 113,654 12/31/05 190,246 115,478 3/31/06 212,758 132,064 6/30/06 202,801 122,489 9/30/06 203,378 120,337 12/31/06 220,445 130,890 3/31/07 224,543 134,130 6/30/07 242,017 143,101 9/30/07 245,603 143,123
Average Annual Total Returns (for period ended 9/30/2007) --------------------------------------------------------------------------------
Since Inception 1 Year 3 Years 5 Years 10 Years 1/2/1996 ------------------------------------------------------------------------------------------ Fund 20.79% 16.57% 19.54% 9.40% 12.56%
* Source: Lipper Inc. Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 4 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ----------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,093.80 $5.04 Hypothetical (5% return per year before expenses) $1,000.00 $1,020.26 $4.86
---------- + Expenses are equal to the Fund's annualized expense ratio of 0.96%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 5 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments ----------------------------------------------------------------------------------------------- Respironics, Inc. Health Care 1.8% Hologic, Inc. Health Care 1.7 Wright Medical Group, Inc. Health Care 1.6 NeuStar, Inc. Telecommunication Services 1.5 Bucyrus International, Inc., Class A Industrials 1.5 Penn Virginia Corp. Energy 1.5 Copart, Inc. Industrials 1.4 Pediatrix Medical Group, Inc. Health Care 1.4 Bright Horizons Family Solutions, Inc. Consumer Discretionary 1.4 Psychiatric Solutions, Inc. Health Care 1.3 ----- 15.1%
*Excludes short-term securities and investment of cash collateral.
Percentage of Economic Sector Allocation Net Assets ----------------------------------------------------------- Consumer Discretionary 11.2% Consumer Staples 4.8 Energy 6.9 Financials 7.6 Health Care 22.3 Industrials 12.4 Materials 5.3 Technology 22.7 Telecomunication Services 1.4 Utilities 0.8 Short-term and Other Assets 4.6 ----- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 6 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--118.9% EQUITIES--95.4% Consumer Discretionary--11.2% Bright Horizons Family Solutions, Inc. 97,103 (a,b) 4,159,893 DeVry, Inc. 41,590 1,539,246 Entravision Communications Corp., Class A 173,763 (a,b) 1,602,095 Iconix Brand Group, Inc. 119,570 (a,b) 2,844,570 Interface, Inc., Class A 215,020 (b) 3,881,111 J.Crew Group, Inc. 22,810 (a,b) 946,615 Lions Gate Entertainment Corp. 343,825 (a) 3,544,836 Pacific Sunware of California 157,200 (a) 2,326,560 Red Robin Gourmet Burgers, Inc. 56,210 (a) 2,411,409 Skechers USA, Inc. Class. A 75,530 (a) 1,669,213 Steiner Leisure Ltd. 81,723 (a) 3,546,778 Texas Roadhouse, Inc., Class A 261,630 (a,b) 3,061,071 True Religion Apparel, Inc. 104,860 (a,b) 1,845,536 WMS Industries, Inc. 61,110 (a) 2,022,741 35,401,674 Consumer Staples--4.8% Hain Celestial Group, Inc. 80,540 (a,b) 2,587,750 Hansen Natural Corp. 45,420 (a,b) 2,574,406 Inter Parfums, Inc. 116,960 (b) 2,768,443 Longs Drug Stores Corp. 79,480 3,947,772 Nu Skin Enterprises, Inc., Class A 107,284 (b) 1,733,709 Ruddick Corp. 51,290 (b) 1,720,267 15,332,347 Energy--6.9% Alpha Natural Resources, Inc. 92,660 (a,b) 2,152,492 Berry Petroleum Co., Class A 60,710 (b) 2,403,509 Dril-Quip, Inc. 19,310 (a,b) 952,949 Oil States International, Inc. 53,710 (a,b) 2,594,193 Overseas Shipholding Group, Inc. 24,730 1,900,006 Parallel Petroleum Corp. 120,410 (a,b) 2,045,766 Penn Virginia Corp. 100,240 (b) 4,408,555 T-3 Energy Services, Inc. 69,282 (a,b) 2,954,184 W-H Energy Services, Inc. 31,500 (a,b) 2,323,125 21,734,779 Financials--7.6% Arch Capital Group Ltd. 38,600 (a) 2,872,226 First Cash Financial Services, Inc. 111,809 (a,b) 2,618,567 First Mercury Financial Corp. 123,512 (a) 2,656,743
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- Financials (continued) GFI Group, Inc. 21,950 (a,b) 1,890,334 Hallmark Financial Services, Inc. 60,880 (a) 855,364 Max Capital Group Ltd. 73,760 2,068,230 Montpelier Re Holdings Ltd. 107,760 1,907,352 OptionsXpress Holdings, Inc. 110,340 (b) 2,884,288 Portfolio Recovery Associates, Inc. 29,660 (b) 1,574,056 RLI Corp. 28,520 1,617,654 Waddell & Reed Financial, Inc. 114,130 3,084,934 24,029,748 Health Care--22.3% Amedisys, Inc. 51,860 (a,b) 1,992,461 Applera Corp.- Celera Genomics Group 132,230 (a) 1,859,154 Array Biopharma, Inc. 116,100 (a,b) 1,303,803 Arrow International, Inc. 60,730 2,762,608 Covance, Inc. 36,490 (a) 2,842,571 Cytyc Corp. 41,730 (a) 1,988,434 Dexcom, Inc. 40,159 (a) 401,188 Enzon Pharmaceuticals, Inc. 236,496 (a,b) 2,083,530 Exelixis, Inc. 188,790 (a) 1,999,286 Hologic, Inc. 83,860 (a,b) 5,115,460 Integra LifeSciences Holdings Corp. 46,450 (a,b) 2,256,541 MGI Pharma, Inc. 56,890 (a) 1,580,404 Natus Medical, Inc. 227,580 (a,b) 3,627,625 NuVasive, Inc. 29,480 (a) 1,059,216 NxStage Medical, Inc. 71,778 (a) 1,040,063 Pediatrix Medical Group, Inc. 64,030 (a) 4,188,843 PerkinElmer, Inc. 110,970 3,241,434 Phase Forward, Inc. 91,690 (a,b) 1,834,717 Poniard Pharmaceuticals, Inc. 171,537 (a,b) 972,615 Psychiatric Solutions, Inc. 103,330 (a,b) 4,058,802 Respironics, Inc. 112,858 (a) 5,420,570 Sangamo Biosciences, Inc. 90,840 (a,b) 1,281,752 Sirtris Pharmaceuticals, Inc. 107,729 (a,b) 1,840,011 Thermo Fisher Scientific, Inc. 67,520 (a,b) 3,897,254 Thoratec Corp. 123,230 (a,b) 2,549,629 TomoTherapy, Inc. 54,266 (a) 1,260,599 VCA Antech, Inc. 81,162 (a) 3,388,514 Wright Medical Group, Inc. 175,461 (a) 4,705,864 70,552,948
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------- Industrials--12.4% AAR Corp. 55,110 (a,b) 1,672,037 Bucyrus International, Inc., Class A 62,310 (b) 4,544,268 Copart, Inc. 122,370 (a) 4,208,304 Endeavor Acquisition Corp. 84,890 (a,b) 1,005,947 Hub Group, Inc., Class A 74,280 (a) 2,230,628 Hurco Companies, Inc. 21,730 (a) 1,174,724 McGrath Rentcorp 84,877 (b) 2,821,311 MSC Industrial Direct Co. Inc. 73,890 3,738,095 OceanFreight, Inc. 45,520 1,057,885 Quanta Services, Inc. 51,170 (a,b) 1,353,447 Ritchie Bros. Auctioneers 56,400 3,671,640 Stanley, Inc. 113,770 (a,b) 3,134,364 Stericycle, Inc. 34,910 (a,b) 1,995,456 UAP Holding Corp. 79,530 (b) 2,494,061 URS Corp. 15,340 (a) 865,943 Washington Group International, Inc. 36,620 (a,b) 3,215,602 39,183,712 Materials--5.3% American Vanguard Corp. 80,620 (b) 1,573,702 Century Aluminum Co. 71,220 (a,b) 3,749,733 Flotek Industries, Inc. 20,850 (a) 920,528 H.B. Fuller Co. 61,140 1,814,635 Horsehead Holding Corp. 47,850 (a,b) 1,072,797 Kinross Gold Corp. 133,580 (a) 2,001,028 Schnitzer Steel Industries, Inc. 26,170 (b) 1,917,999 Silver Wheaton Corp. 265,850 (a) 3,727,217 16,777,639 Technology--22.7% ADC Telecommunications, Inc. 48,970 (a) 960,302 AMIS Holdings, Inc. 158,600 (a) 1,540,006 Arris Group, Inc. 41,510 (a,b) 512,648 Atheros Communications, Inc. 66,210 (a,b) 1,984,314 Bankrate, Inc 43,410 (a,b) 2,002,069 ChipMOS TECHNOLOGIES (Bermuda) LTD. 311,630 (a,b) 1,866,664 Dice Holdings, Inc. 7,038 (a) 72,351 Diodes, Inc. 72,380 (a,b) 2,323,398 DivX, Inc. 84,594 (a,b) 1,257,913 Epicor Software Corp. 133,600 (a,b) 1,839,672 Euronet Worldwide, Inc. 25,500 (a) 753,576
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------------------------------------------- Technology (continued) FLIR Systems, Inc. 41,890 (a,b) 2,320,287 Forrester Research, Inc. 69,048 (a,b) 1,627,461 Foundry Networks, Inc. 139,410 (a) 2,477,316 Informatica Corp. 221,740 (a,b) 3,481,318 Internap Network Services Corp. 133,750 (a) 1,895,238 Intervoice, Inc. 191,360 (a,b) 1,796,870 Lawson Software, Inc. 160,900 (a) 1,610,609 MasTec, Inc. 128,716 (a,b) 1,811,034 Microsemi Corp. 119,640 (a,b) 3,335,563 MIPS Technologies, Inc. 208,014 (a,b) 1,643,311 MPS Group, Inc. 60,360 (a) 673,014 Net Gear, Inc. 107,610 (a,b) 3,273,496 Netscout Systems, Inc. 246,290 (a) 2,684,561 Online Resources Corp. 98,100 (a,b) 1,239,984 OpNext, Inc. 134,733 (a) 1,562,903 QAD, Inc. 108,301 (b) 937,887 RealNetworks, Inc. 396,760 (a,b) 2,690,033 RF Micro Devices, Inc. 366,640 (a) 2,467,487 SkillSoft PLC ADR 121,287 (a) 1,090,370 Solera Holdings, Inc. 168,693 (a) 3,034,787 Tech Data Corp. 45,640 (a,b) 1,831,077 Tessera Technologies, Inc. 103,520 (a) 3,882,000 The Ultimate Software Group, Inc. 49,720 (a,b) 1,735,228 TheStreet.com, Inc. 99,962 (b) 1,210,540 Trident Microsystems, Inc. 71,170 (a) 1,130,891 TriQuint Semiconductor, Inc. 270,200 (a,b) 1,326,682 Virtusa Corp. 70,460 (a) 1,056,900 Wright Express Corp. 84,490 (a,b) 3,083,040 72,022,800 Telecommunication Services--1.4% NeuStar, Inc. 132,530 (a,b) 4,544,454 Utilities--0.8% Ormat Technologies, Inc. 51,860 (b) 2,403,192 Total Equities (Cost $262,847,785) 301,983,293 SHORT-TERM INVESTMENTS--0.3% Rate Maturity Par Value ---- -------- --------- U.S. Government--0.3% U.S. Treasury Bill (Cost $912,525) 3.90% 12/13/2007 920,000 (c,d) 913,195
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------------------------------------------- INVESTMENT OF CASH COLLATERAL--23.2% BlackRock Cash Strategies L.L.C. (Cost $73,517,496) 73,517,496 73,517,496 TOTAL UNAFFILIATED INVESTMENTS (Cost $337,277,806) 376,413,984 AFFILIATED INVESTMENTS--10.1% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $31,845,158) 31,845,158 (e) 31,845,158 ----------- TOTAL INVESTMENTS--129.0% (Cost $369,122,964) 408,259,142 LIABILITIES IN EXCESS OF OTHER ASSETS--(29.0%) (91,780,063) ----------- NET ASSETS--100% 316,479,079 ===========
Notes to Schedule of Investments: ADR--American Depository Receipts (a) Non-income producing security. (b) Security, or a portion of thereof, was on loan at September 30, 2007. (c) Denotes all or part of security segregated as collateral for futures transactions. (d) Rate noted is yield to maturity. (e) Affilated institutional money market fund. At September 30, 2007 the Fund held the following futures contracts:
Underlying Face Unrealized Contract Position Expiration Date Amount at Value (Depreciation) ---------------------------------------------------------------------------------------------------------------- Russell 2000 Index (5 Contracts) Long 11/30/2007 $2,033,000 ($2,643) =======
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investment in securities, at value (Note 1A) (including securities on loan, valued at $70,258,013 (Note 7)): Unaffiliated investments (cost $337,277,806) $376,413,984 Affiliated investments (Note 1F) (cost $31,845,158) 31,845,158 Cash collateral at broker for futures contracts 260,000 Receivable for investments sold 7,182,786 Receivable for Fund shares sold 931,913 Interest and dividends receivable 161,944 Prepaid expenses 17,754 ------------ Total assets 416,813,539 Liabilities Collateral for securities on loan (Note 7) $ 73,517,496 Payable for investments purchased 26,601,147 Payable for variation margin on open futures contracts (Note 6) 62,515 Payable for Fund shares redeemed 40,488 Accrued accounting, custody, administration and transfer agent fees (Note 2) 53,723 Accrued professional fees 34,371 Accrued administrator service fees (Note 2) 15,193 Accrued trustees' fees and expenses (Note 2) 4,847 Accrued shareholder reporting fee (Note 2) 1,929 Accrued chief compliance officer fee (Note 2) 366 Other accrued expenses and liabilities 2,385 ------------ Total liabilities 100,334,460 ------------ Net Assets $316,479,079 ============ Net Assets consist of: Paid-in capital $259,763,298 Accumulated net realized gain 17,582,246 Net unrealized appreciation 39,133,535 ------------ Total Net Assets $316,479,079 ============ Shares of beneficial interest outstanding 7,334,321 ============ Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 43.15 ============
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Statement of Operations For the Year Ended September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments (net of foreign withholding taxes of $2,958) $ 733,479 Dividend income from affiliated investments (Note 1F) 783,700 Securities lending income (Note 7) 242,722 Interest income 24,503 ----------- Total investment income 1,784,404 Expenses Investment advisory fee (Note 2) $ 1,801,861 Accounting, custody, administration and transfer agent fees (Note 2) 182,879 Administrative service fees (Note 2) 59,541 Professional fees 42,495 Registration fees 19,575 Trustees' fees and expenses (Note 2) 18,268 Insurance expense 6,600 Miscellaneous expenses 30,411 ------------ Net Expenses 2,161,630 ----------- Net investment loss (377,226) ----------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 18,099,950 Financial futures transactions 1,041,212 ------------ Net realized gain 19,141,162 Change in unrealized appreciation (depreciation) on: Investments 20,857,956 Financial futures contracts 63,856 ------------ Change in net unrealized appreciation (depreciation) 20,921,812 ----------- Net realized and unrealized gain (loss) 40,062,974 ----------- Net Increase in Net Assets from Operations $39,685,748 ===========
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Statements of Changes in Net Assets
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ (377,226) $ (291,040) Net realized gain (loss) 19,141,162 28,507,556 Change in net unrealized appreciation (depreciation) 20,921,812 (15,412,552) ------------ ------------ Net increase (decrease) in net assets from investment operations 39,685,748 12,803,964 ------------ ------------ Distributions to Shareholders (Note 1C) From net realized gains on investments (27,215,421) (11,653,235) ------------ ------------ Fund Share Transactions (Note 4) Net proceeds from sale of shares 149,130,264 25,431,734 Value of shares issued to shareholders in reinvestment of distributions 25,616,045 9,807,382 Cost of shares redeemed (31,289,631) (35,872,639) ------------ ------------ Net increase (decrease) in net assets from Fund share transactions 143,456,678 (633,523) ------------ ------------ Total Increase (Decrease) in Net Assets 155,927,005 517,206 Net Assets At beginning of year 160,552,074 160,034,868 ------------ ------------ At end of year $316,479,079 $160,552,074 ============ ============
The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, ------------------------------------------------------------ 2007 2006 2005 2004 2003 -------- -------- -------- -------- -------- Net Asset Value, Beginning of Year $ 42.27 $ 42.35 $ 34.71 $ 29.58 $ 22.53 -------- -------- -------- -------- -------- From Operations: Net investment income (loss)* (a) (0.07) (0.08) (0.10) (0.24) (0.11) Net realized and unrealized gains (loss) on investments 8.07(b) 3.08 7.74 5.37(b) 7.16(b) -------- -------- -------- -------- -------- Total from operations 8.00 3.00 7.64 5.13 7.05 -------- -------- -------- -------- -------- Less Distributions to Shareholders: From net realized gains on investments (7.12) (3.08) -- -- -- -------- -------- -------- -------- -------- Total distributions to shareholders (7.12) (3.08) -- -- -- -------- -------- -------- -------- -------- Net Asset Value, End of Year $ 43.15 $ 42.27 $ 42.35 $ 34.71 $ 29.58 ======== ======== ======== ======== ======== Total Return 20.79% 7.49% 22.01% 17.34% 31.29%(c) Ratios/Supplemental data: Expenses (to average daily net assets)* 0.96% 0.99% 0.99% 1.03% 1.00% Net Investment Income (loss) (to average daily net assets)* (0.17%) (0.18%) (0.26%) (0.71%) (0.43%) Portfolio Turnover 170% 169% 137% 150% 252% Net Assets, End of Year (000's omitted) $316,479 $160,552 $160,035 $120,372 $106,718 * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios excluding waivers and reimbursements would have been: Net investment income per share (a) N/A N/A N/A N/A $ (0.13) Ratios (to average daily net assets): Expenses N/A N/A N/A N/A 1.07% Net investment income N/A N/A N/A N/A (0.50%)
(a) Calculated based on average shares outstanding. (b) Amounts includes litigation proceeds received by the Fund of $0.04 for the year ended September 30, 2007, $0.03 for the year ended September 30, 2004 and $0.01 for the year ended September 30, 2003. (c) Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 15 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Cap Tax-Sensitive Equity Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to maximize after-tax total return, consisting of long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of small capitalization U.S. companies. The Fund considers small cap companies to have total market capitalizations equal to or less than the total market capitalization of the largest company included in the Russell 2000 Growth Index. The Fund may also invest in equity index futures contracts based primarily upon the Russell 2000 Index. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to wash sales and the timing of recognition of realized and unrealized gains and losses on futures contracts. Permanent book and tax basis differences relating to shareholder distributions result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 16 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to TBCAM for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 0.80% of the Fund's average daily net assets. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $12,680, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $170,199 for the year ended September 30, 2007. The Trust also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, the Fund earned $103,656 for the year ended September 30, 2007. See Note 7 for further details. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $540 for the year ended September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,249, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. 17 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $5,122, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $58,850 for fees payable to BNY Mellon Private Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ------------ ------------ Non-U.S. Government Securities $480,194,993 $365,752,741 ============ ============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 3,640,582 604,209 Shares issued to shareholders in reinvestment of distributions 659,528 244,757 Shares redeemed (764,326) (829,484) --------- -------- Net increase (decrease) 3,535,784 19,482 ========= ========
At September 30, 2007, two shareholders of record held in the aggregate 65.8% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund did not assess any redemption fees. (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. 18 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact on the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $369,909,291 ============ Gross unrealized appreciation $ 42,150,810 Gross unrealized depreciation (3,800,959) ------------ Net unrealized appreciation (depreciation) $ 38,349,851 ============ Undistributed ordinary income $ 7,443,213 Undistributed capital gains 10,922,717 ------------ Total distributable earnings $ 18,365,930 ============
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006, was as follows:
2007 2006 ----------- ----------- Ordinary income $ 8,747,920 $ 2,298,653 Long-Term Capital Gains 18,467,501 9,354,582 ----------- ----------- Total Distributions $27,215,421 $11,653,235 =========== ===========
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Futures contracts The Fund may enter into financial futures contracts for the purchase or sale of securities, or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized appreciation or depreciation by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may also arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Fund enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At September 30, 2007, the Fund held open financial futures contracts. See the Schedule of Investments for further details. 19 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- (7) Security Lending: The Fund may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $2,790,013 of which $2,547,291 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $70,258,013 on loan, of which $73,517,496 was collateralized with cash and $17,655 was collateralized with highly liquid securities. See Schedule of Investments for further detail on the security positions on loan and collateral held. 20 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Tax-Sensitive Equity Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of The Boston Company Small Cap Tax-Sensitive Equity Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company Small Cap Tax-Sensitive Equity Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 21 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ----------------------------------------------------------------------------------------------------------------------------------- Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $2,410 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $2,410 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $2,410 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $2,493 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* * Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 22 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years -------------------------------------------------------------------------------------------------------------------------------- Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 23 THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6938AR0907 MELLON INSTITUTIONAL FUNDS The Boston Company Annual Report Small Cap Value Fund -------------------------------------------------------------------------------- Year Ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Small-cap stocks rallied early in the reporting period amid moderate economic growth, stable short-term interest rates and rising corporate earnings. At the time, investors maintained an ample appetite for risk, which benefited shares of smaller companies more than their larger counterparts. However, the market environment changed dramatically in mid-June 2007, when credit concerns in the sub-prime mortgage sector spread to other areas of the financial markets. In the ensuing market turbulence, newly risk-averse investors engaged in a "flight to quality," and larger, higher-quality companies returned to favor. The Federal Reserve Board attempted to improve market liquidity by reducing key short-term interest rates in August and September. These moves bolstered investor confidence that a recession could be avoided, sparking a market rally late in the reporting period. For the 12-month period ended September 30, 2007, The Boston Company Small Cap Value Fund returned 11.18% as compared to the fund's benchmark, the Russell 2000 Value Index, which returned 6.09% over the same period. The fund participated to a substantial degree in the small-cap market's advance. The fund achieved particularly strong results among information technology companies, including electron microscope semiconductors maker FEI Company, which gained greater penetration of nanotechnology markets, and Microsemi Corp., which continues to see strong growth in demand for its high performance analog chip. A number of other semiconductor companies in the fund's portfolio also produced strong returns during the reporting period. In the communications equipment industry group, the fund scored successes with consumer networking equipment manufacturer Netgear and telecommunications and military networking specialist Comtech Telecommunications. In the health care sector, home care services provider OptionCare was acquired by pharmacy chain Walgreen, and medical helicopter services contractor Air Methods captured a larger share of hospital and municipal markets. The energy sector led the benchmark's performance during the reporting period, and the fund participated in its strength through holdings such as oil well drilling equipment maker Hydrill, which was acquired by energy services company Quanta Services, and oil and gas operations specialty service provider CARBO Ceramics, which boosted earnings after adding to manufacturing capacity. Among industrial companies, engineering and construction firm Infrasource Services benefited from increased investment in power transmission facilities, and Shaw Group gained value in an improved global environment for the construction of nuclear power plants as more nations develop alternatives to fossil fuels. Conversely, some holdings and industry groups detracted from the fund's performance during the reporting period. For example, regional electric utility PNM Resources was unable to pass along higher commodity costs to its customers, and the fund's underweighted position in the materials sector prevented it from participating fully in the sector's strength as compared to the benchmark. 2 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Management Discussion and Analysis -------------------------------------------------------------------------------- Although our "bottom-up" investment process does not consider macroeconomic trends directly, we are aware that the U.S. economy is in the later stages of its cycle and some market indices recently have set new record highs. In our judgment, our relatively cautious, value-oriented approach to security selection is well positioned for this environment, as it places a high degree of emphasis on characteristics of individual companies such as solid business fundamentals, healthy balance sheets and the ability to generate cash consistently. We recently have found fewer opportunities meeting our criteria among industrial companies, which have reached fuller valuations, and more in the information technology, health care and consumer discretionary areas, which have offered better values after extended periods of underperformance. Joseph Corrado, CFA Stephanie Brandaleone, CFA Portfolio Manager Portfolio Manager The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
3 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Comparison of Change in Value of $100,000 Investment in The Boston Company Small Cap Value Fund and the Russell 2000 Value Index (Unaudited) -------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED DOCUMENT.]
TBC PERIOD Small Cap Value Fund Russell 2000 Value Index* 2/1/00 100,000 100,000 3/31/00 117,919 106,610 6/30/00 118,912 108,690 9/30/00 126,979 116,667 12/31/00 131,836 126,124 3/31/01 128,448 127,350 6/30/01 149,446 142,170 9/30/01 130,942 123,211 12/31/01 158,998 143,811 3/31/02 175,988 157,587 6/30/02 170,003 154,246 9/30/02 137,952 121,406 12/31/02 141,694 127,381 3/31/03 132,789 120,910 6/30/03 162,696 148,385 9/30/03 178,859 159,848 12/31/03 207,037 186,010 3/31/04 223,910 198,881 6/30/04 231,020 200,567 9/30/04 232,506 200,867 12/31/04 264,849 227,389 3/31/05 253,715 218,344 6/30/05 268,978 229,427 9/30/05 282,114 236,523 12/31/05 284,121 238,094 3/31/06 317,413 270,250 6/30/06 314,082 262,943 9/30/06 317,160 269,653 12/31/06 346,674 293,997 3/31/07 355,871 298,293 6/30/07 371,194 305,156 9/30/07 352,627 286,063
Average Annual Total Returns (for period ended 9/30/2007) --------------------------------------------------------------------------------
Since Inception 1 Year 3 Years 5 Years 2/1/2000 -------------------------------------------------------------------------------------------------------- Fund 11.18% 14.89% 20.65% 17.88%
* Source: Lipper Inc. Average annual total returns reflect the change in the value of an investment, assuming reinvestment of the fund's dividends from income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 4 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ---------------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $ 990.90 $4.84 Hypothetical (5% return per year before expenses) $1,000.00 $1,020.21 $4.91
---------------- + Expenses are equal to the Fund's annualized expense ratio of 0.97%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 5 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments ----------------------------------------------------------------------------------------------------- Ralcorp Holdings, Inc. Consumer Staples 1.9% Longs Drug Stores Corp. Consumer Staples 1.8 Scholastic Corp. Consumer Discretionary 1.3 Clean Harbors, Inc. Industrials 1.3 BJ'S Wholesale Club, Inc. Consumer Staples 1.3 Comtech Telecommunications Corp. Technology 1.2 CARBO Ceramics, Inc. Energy 1.2 Metal Management, Inc. Materials 1.2 Pacific Capital Bancorp. Financial 1.2 Pediatrix Medical Group, Inc. Health Care 1.1 ---- 13.5%
* Excludes short-term securities and investment of cash collateral.
Percentage of Economic Sector Allocation Net Assets -------------------------------------------------------------- Consumer Discretionary 17.0% Consumer Staples 7.0 Energy 5.8 Financials 18.5 Health Care 9.5 Industrials 10.5 Materials 3.5 Technology 20.6 Telecommunications Services 1.1 Utilities 3.0 Short-term and Net other Assets 3.5 ----- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 6 Mellon Institutional Funds Master Portfolio The Boston Company Small Cap Value Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--120.1% EQUITIES--96.5% Consumer Discretionary--17.0% AnnTaylor Stores Corp. 261,000 (a) 8,265,870 Big 5 Sporting Goods Corp. 275,634 (b) 5,154,356 Cache, Inc. 255,200 (a) 4,555,320 Cavco Industries, Inc. 82,832 (a,b) 2,774,872 Champion Enterprises, Inc. 262,600 (a,b) 2,883,348 Charming Shoppes, Inc. 406,970 (a,b) 3,418,548 Courier Corp. 122,690 (b) 4,319,915 Cox Radio, Inc., Class A 354,820 (a,b) 4,630,401 Drew Industries, Inc. 120,930 (a,b) 4,919,432 Entravision Communications Corp., Class A 559,806 (a,b) 5,161,411 Ethan Allen Interiors, Inc. 180,520 (b) 5,901,199 Gentex Corp. 351,780 (b) 7,542,163 Jos. A Bank Clothiers, Inc. 189,760 (a,b) 6,341,779 Kenneth Cole Productions, Inc., Class A 248,210 (b) 4,807,828 Live Nation, Inc. 394,800 (a,b) 8,389,500 M.D.C. Holdings, Inc. 203,800 (b) 8,343,572 Meredith Corp. 148,340 8,499,882 Morton's Restaurant Group, Inc. 212,435 (a,b) 3,377,716 New York & Co, Inc. 653,647 (a,b) 3,987,247 Regis Corp. 233,890 7,463,430 Scholastic Corp. 309,530 (a,b) 10,790,216 Tenneco, Inc. 241,893 (a,b) 7,501,102 Timberland Co., Class A 224,380 (a,b) 4,254,245 Zale Corp. 353,480 (a,b) 8,179,527 141,462,879 Consumer Staples--7.0% BJ'S Wholesale Club, Inc. 302,230 (a,b) 10,021,947 Casey's General Stores, Inc. 322,560 (b) 8,934,912 Lance, Inc. 203,624 (b) 4,687,424 Longs Drug Stores Corp. 297,380 (b) 14,770,865 Performance Food Group Co. 142,700 (a) 4,299,551 Ralcorp Holdings, Inc. 270,660 (a,b) 15,108,241 57,822,940 Energy--5.8% CARBO Ceramics, Inc. 188,970 (b) 9,586,448 Dril-Quip, Inc. 99,933 (a,b) 4,931,694 Oil States International, Inc. 142,400 (a,b) 6,877,920 Penn Virginia Corp. 202,380 8,900,672 Superior Well Services, Inc. 197,670 (a,b) 4,493,039 Tetra Technologies, Inc. 219,920 (a,b) 4,649,109 Unit Corp. 173,710 (a) 8,407,564 47,846,446
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Master Portfolio The Boston Company Small Cap Value Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------------------------- Financials--18.5% Alabama National Bancorp 21,350 (b) 1,663,592 American Financial Realty Trust REIT 574,536 (b) 4,625,015 Anthracite Capital, Inc. REIT 512,020 (b) 4,659,382 Aspen Insurance Holdings Ltd. 229,910 6,416,788 Assured Guaranty Ltd. 272,770 7,411,161 BankAtlantic Bancorp, Inc., Class A 475,230 (b) 4,120,244 Care Investment Trust, Inc. REIT 294,500 (a) 3,534,000 Citizens Republic Bancorp, Inc. 205,460 (b) 3,309,961 Cowen Group, Inc. 116,046 (a) 1,603,756 Education Realty Trust, Inc. REIT 348,606 (b) 4,706,181 Financial Federal Corp. 272,950 (b) 7,645,330 First Indiana Corp. 130,510 4,087,573 First Potomac Realty Trust REIT 201,210 (b) 4,386,378 Firstmerit Corp. 299,900 (b) 5,926,024 Flushing Financial Corp. 153,660 (b) 2,581,488 Horace Mann Educators Corp. 184,750 3,641,422 Intervest Bancshares Corp. 123,338 3,052,616 Lasalle Hotel Properties REIT 111,500 (b) 4,691,920 Lexington Realty Trust REIT 312,020 (b) 6,243,520 Mission West Properties REIT 233,310 (b) 2,834,716 Old National Bancorp 290,120 (b) 4,807,288 Pacific Capital Bancorp 361,732 (b) 9,513,552 Philadelphia Consolidated Holding Corp. 151,700 (a) 6,271,278 Piper Jaffray Cos. 130,740 (a,b) 7,007,664 Provident Bankshares Corp. 100,430 (b) 3,146,472 Redwood Trust, Inc. REIT 208,070 (b) 6,912,085 Security Capital Assurance Ltd. 297,150 6,786,906 Southwest Bancorp, Inc. 147,315 (b) 2,772,468 Sterling Bancshares, Inc. 278,560 3,178,370 Strategic Hotels and Resorts, Inc. REIT 179,190 (b) 3,689,522 Texas Capital Bancshares, Inc. 143,473 (a,b) 3,119,103 Washington Federal, Inc. 302,303 7,938,477 Washington Trust Bancorp, Inc. 38,100 (b) 1,027,557 153,311,809 Health Care--9.5% Air Methods Corp. 146,650 (a,b) 6,775,230 Amedisys, Inc. 129,000 (a) 4,956,180 Computer Programs & Systems, Inc. 135,750 (b) 3,578,370 Healthsouth Corp. 169,700 (a,b) 2,971,447 K-V Pharmaceutical Co., Class A 171,214 (a,b) 4,896,720 Kensey Nash Corp. 69,000 (a) 1,801,590 Lifepoint Hospitals, Inc. 207,022 (a,b) 6,212,730 Magellan Health Services, Inc. 143,750 (a,b) 5,833,375 Medical Action Industries, Inc. 192,385 (a) 4,551,829
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Master Portfolio The Boston Company Small Cap Value Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) --------------------------------------------------------------------------------------------------------------------------------- Health Care (continued) Medicines Co. 183,900 (a,b) 3,275,259 Odyssey HealthCare, Inc. 446,300 (a) 4,288,943 Pediatrix Medical Group, Inc. 138,590 (a,b) 9,066,558 Phase Forward, Inc. 315,010 (a,b) 6,303,350 Providence Service Corp. 241,510 (a,b) 7,090,734 Res-Care, Inc. 310,354 (a,b) 7,088,485 78,690,800 Industrials--10.5% American Ecology Corp. 223,540 (b) 4,736,813 Bowne & Co., Inc. 304,660 5,075,636 Casella Waste Systems, Inc., Class A 472,760 (a) 5,928,410 Clean Harbors, Inc. 225,140 (a,b) 10,023,233 Comfort Systems USA, Inc. 179,770 2,552,734 Curtiss-Wright Corp. 132,930 6,314,175 Esterline Technologies Corp. 124,591 (a,b) 7,107,917 II-VI, Inc. 141,650 (a,b) 4,891,174 Insituform Technologies, Inc., Class A 200,631 (a,b) 3,055,610 LECG Corp. 396,720 (a,b) 5,911,128 McGrath Rentcorp 177,390 (b) 5,896,444 Moog, Inc., Class A 176,380 (a,b) 7,750,137 School Specialty, Inc. 101,070 (a,b) 3,500,054 Tetra Tech, Inc. 178,563 (a,b) 3,771,251 United Stationers, Inc. 88,090 (a) 4,890,757 Waste Connections, Inc. 192,629 (a,b) 6,117,897 87,523,370 Materials--3.5% AMCOL International Corp. 125,670 (b) 4,158,420 Compass Minerals International, Inc. 133,040 (b) 4,528,682 Glatfelter 252,640 (b) 3,749,178 Metal Management, Inc. 175,960 (b) 9,537,032 Neenah Paper, Inc. 132,620 (b) 4,388,396 Wausau Paper Corp. 243,680 2,717,032 29,078,740 Technology--20.6% AspenTech, Inc. 397,400 (a) 5,690,768 Avid Technology, Inc. 182,430 (a,b) 4,940,204 Cirrus Logic, Inc. 709,160 (a,b) 4,538,624 Comtech Telecommunications Corp. 184,640 (a,b) 9,876,394 Cray, Inc. 451,200 (a) 3,248,640 CSG Systems International, Inc. 286,510 (a,b) 6,088,337 Cymer, Inc. 103,610 (a,b) 3,977,588 Electronics for Imaging, Inc. 286,990 (a,b) 7,708,551 Emulex Corp. 353,620 (a) 6,778,895
The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Master Portfolio The Boston Company Small Cap Value Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) -------------------------------------------------------------------------------------------------------------------------------- Technology (continued) Epicor Software Corp. 348,280 (a,b) 4,795,816 EPIQ Systems, Inc. 211,750 (a,b) 3,985,135 Fair Issac Corp. 115,200 (b) 4,159,872 FEI Co. 281,330 (a,b) 8,842,202 Foundry Networks, Inc. 336,110 (a,b) 5,972,675 Harris Stratex Networks, Inc., Class A 266,800 (a) 4,660,996 Hutchinson Technology, Inc. 143,730 (a,b) 3,535,758 Mercury Computer Systems, Inc. 236,640 (a,b) 2,432,659 Micrel, Inc. 568,820 (b) 6,143,256 Microsemi Corp. 312,380 (a,b) 8,709,154 MKS Instruments, Inc. 168,400 (a,b) 3,202,968 MTS Systems Corp. 157,540 6,553,664 Net Gear, Inc. 224,650 (a,b) 6,833,853 NIC, Inc. 576,990 (b) 4,004,311 Parametric Technology Corp. 333,900 (a) 5,816,538 Perot Systems Corp., Class A 199,430 (a) 3,372,361 Powerwave Technologies, Inc. 968,332 (a,b) 5,964,925 Rogers Corp. 102,230 (a,b) 4,210,854 Rudolph Technologies, Inc. 238,920 (a) 3,304,264 Semtech Corp. 292,770 (a) 5,995,930 SI International, Inc. 24,533 (a) 700,908 SRA International, Inc. 223,100 (a,b) 6,264,648 Sybase, Inc. 240,910 (a) 5,572,248 TTM Technologies, Inc. 304,300 (a,b) 3,520,751 171,403,747 Telecommunication Services--1.1% Cincinnati Bell, Inc. 1,622,860 (a,b) 8,016,928 EMS Technologies, Inc. 44,600 (a,b) 1,094,038 9,110,966 Utilities--3.0% Black Hills Corp. 158,000 (b) 6,481,160 El Paso Electric Co. 218,010 (a,b) 5,042,571 PNM Resources, Inc. 372,000 (b) 8,660,160 Portland General Electric Co. 146,000 (b) 4,058,800 SJW Corp. 21,025 717,793 24,960,484 Total Equities (Cost $754,284,006) 801,212,181
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Master Portfolio The Boston Company Small Cap Value Fund Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Par Value ($) Security Rate Maturity Value (Note 1A) ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS--0.2% U.S. Government--0.2% U.S. Treasury Bill (Cost $1,527,467) 3.90% 12/13/2007 1,540,000 (c,d) 1,528,609 INVESTMENT OF CASH COLLATERAL--23.4% Shares ----------- BlackRock Cash Strategies L.L.C. (Cost $193,682,266) 193,682,266 193,682,266 TOTAL UNAFFILIATED INVESTMENTS (Cost $949,493,739) 996,423,056 AFFILIATED INVESTMENTS--4.6% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $38,205,138) 38,205,138 (e) 38,205,138 ------------- TOTAL INVESTMENTS--124.7% (Cost $987,698,877) 1,034,628,194 LIABILITIES IN EXCESS OF OTHER ASSETS--(24.7%) (204,671,565) ------------- NET ASSETS--100% 829,956,629 =============
Notes to Schedule of Investments: REIT--Real Estate Investment Trust a Non-income producing security. b Security, or a portion of thereof, was on loan at September 30, 2007. c Rate noted is yield to maturity. d Denotes all or part of security pledged as collateral. e Affiliated institutional money market fund. At September 30, 2007 the fund held the following futures contracts:
Underlying Face Unrealized Contract Position Expiration Date Amount at Value Appreciation --------------------------------------------------------------------------------------------------------------------------- Russell 2000 Index (55 Contracts) Long 11/30/2007 $22,363,000 $670,805 ========
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investment in securities (Note 1A) (including securities on loan, valued at $182,538,423 (Note 7)) Unaffiliated issuers, at value (cost $949,493,739) $ 996,423,056 Affiliated issuers, at value (Note 1F) (cost $38,205,138) 38,205,138 Cash 5,943 Receivable for investments sold 9,176,676 Receivable for Fund shares sold 2,049,790 Interest and dividends receivable 1,024,527 Prepaid expenses 17,008 -------------- Total assets 1,046,902,138 Liabilities Collateral for securities on loan (Note 7) $ 193,682,266 Payable for investments purchased 21,048,444 Payable for Fund shares redeemed 1,794,394 Payable for variation margin on open futures contracts (Note 6) 197,285 Accrued administrative service fees (Note 2) 93,167 Accrued accounting, administration, custody and transfer agent fees (Note 2) 59,103 Accrued professional fees 55,785 Accrued trustees' fees (Note 2) 8,611 Accrued chief compliance officer fee (Note 2) 388 Other accrued expenses and liabilities 6,066 ------------- Total liabilities 216,945,509 -------------- Net Assets $ 829,956,629 ============== Net Assets consist of: Paid-in capital $ 738,517,494 Accumulated net realized gain 42,503,265 Undistributed net investment income 1,335,748 Net unrealized appreciation 47,600,122 -------------- Total Net Assets $ 829,956,629 ============== Shares of beneficial interest outstanding 32,850,739 ============== Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 25.26 ==============
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Statement of Operations For the Year Ended September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments $ 680,543 Dividend income from affiliated investments (Note 1F) 52,520 Securities lending income (Note 7) 43,829 Interest income 1,504 Allocated investment income from portfolio (Note 9) 10,513,648 Allocated expenses from portfolio (Note 9) (6,003,500) ----------- Total Investment Income 5,288,544 Expenses Investment advisory fee (Note 2) $ 202,225 Administrative service fees (Note 2) 251,070 Accounting, administration, custody and transfer agent fees (Note 2) 42,964 Professional fees 71,632 Registration fees 64,446 Trustees' fees (Note 2) 2,777 Insurance expense 2,150 Miscellaneous expenses 65,232 ----------- Total expenses 702,496 ----------- Net investment income 4,586,048 ----------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (8,133,245) Financial futures transactions 286,755 Allocation of realized gains from portfolio (Note 9) 51,927,670 ----------- Net realized gain (loss) 44,081,180 Change in unrealized appreciation (depreciation) on: Investments (5,563,474) Financial futures contracts (412,489) Allocation of unrealized appreciation from portfolio (Note 9) 19,572,475 ----------- Change in net unrealized appreciation (depreciation) 13,596,512 ----------- Net realized and unrealized gain (loss) 57,677,692 ----------- Net Increase in Net Assets from Operations $62,263,740 ===========
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Statement of Changes in Net Assets --------------------------------------------------------------------------------
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income $ 4,586,048 $ 1,320,137 Net realized gain (loss) 44,081,180 18,994,109 Change in net unrealized appreciation (depreciation) 13,596,512 14,188,217 ------------- ------------ Net increase (decrease) in net assets from investment operations 62,263,740 34,502,463 ------------- ------------ Distributions to Shareholders (Note 1C) From net investment income (2,720,774) (446,329) From net realized gains on investments (25,544,571) (13,455,548) ------------- ------------ Total distributions to shareholders (28,265,345) (13,901,877) ------------- ------------ Fund Share Transactions (Note 4) Net proceeds from sale of shares 389,073,666 374,463,760 Value of shares issued in reinvestment of distributions 21,086,392 10,108,779 Cost of shares redeemed (net of redemption fees of $28,716 and $31,354, respectively) (153,762,234) (55,259,897) ------------- ------------ Net increase (decrease) in net assets from Fund share transactions 256,397,824 329,312,642 ------------- ------------ Total Increase (Decrease) in Net Assets 290,396,219 349,913,228 Net Assets At beginning of year 539,560,410 189,647,182 ------------- ------------ At end of year (including undistributed net investment income of $1,335,748 and $820,716, respectively) $ 829,956,629 $539,560,410 ============= ============
The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Financial Highlights --------------------------------------------------------------------------------
Year Ended September 30, -------------------------------------------------------------- 2007 2006 2005 2004 2003 --------- --------- -------- -------- -------- Net Asset Value, Beginning of Year $ 23.70 $ 22.55 $ 21.91 $ 18.49 $ 14.30 --------- --------- -------- -------- -------- From Investment Operations: Net investment income (loss)*(a) 0.16 0.09 0.02 (0.05) (0.01) Net realized and unrealized gains (loss) on investments 2.48 2.58 4.29 5.27 4.24 --------- --------- -------- -------- -------- Total from operations 2.64 2.67 4.31 5.22 4.23 --------- --------- -------- -------- -------- Less Distributions to Shareholders: From net investment income (0.09) (0.03) -- -- (0.02) From net realized gains on investments (0.99) (1.49) (3.67) (1.80) (0.02) --------- --------- -------- -------- -------- Total distributions to shareholders (1.08) (1.52) (3.67) (1.80) (0.04) --------- --------- -------- -------- -------- Net Asset Value, End of Year $ 25.26 $ 23.70 $ 22.55 $ 21.91 $ 18.49 ========= ========= ======== ======== ======== Ratios/Supplemental data: Total Return 11.18% 12.42% 21.34% 29.92% 29.64%(b) Expenses (to average daily net assets)*(c) 0.90% 0.94% 1.05% 1.18% 1.15% Net Investment Income (Loss) (to average daily net assets)* 0.61% 0.40% 0.08% (0.24%) (0.05%) Portfolio Turnover(d) 67% 60% 70% 123% 51%(e) Net Assets, End of Year (000's omitted) $ 829,957 $ 539,560 $189,647 $ 61,182 $ 45,305 ------------- * The investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios without waivers and reimbursement would have been: Net investment income per share (a) N/A N/A N/A N/A $(0.03) Ratios (to average daily net assets): Expenses (c) N/A N/A N/A N/A 1.28% Net investment income (loss) N/A N/A N/A N/A (0.18%)
(a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) For the period October 1, 2006 to September 19, 2007 and for the fiscal years ended September 30, 2003-2006, the ratio includes the Fund's share of the TBC Small Cap Value Portfolio's allocated expenses. (d) On September 19, 2007, the Fund, which had owned approximately 100% of the Portfolio on such date, withdrew entirely from the Portfolio and received the Portfolio's securities and cash in exchange for its interests in the Portfolio. Effective September 20, 2007, the Fund began investing directly in the securities in which the Portfolio had invested. Portfolio turnover represents investment activity of both the Fund and the Portfolio for the year. The amounts shown for 2003-2006 are the ratios for the Portfolio. (e) Portfolio turnover represents activity while the Fund was investing directly in securities until January 23, 2003. The Portfolio turnover for the period January 24, 2003 to September 30, 2003 was 51%. The accompanying notes are an integral part of the financial statements. 15 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Cap Value Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of small cap U.S. companies. The Fund focuses on companies with total market capitalizations equal to or less than the total market capitalization of the largest company included in the Russell 2000 Index. Prior to September 20, 2007, the Fund had invested substantially all of its investable assets in The Boston Company Small Cap Value Portfolio (the "Portfolio"), a subtrust of the Mellon Institutional Funds Master Portfolio, the "Portfolio Trust", a New York trust. The Portfolio had investment objectives, policies, limitations and accounting policies substantially identical to those of the Fund. While investing in the Portfolio, the Fund earned its proportionate share of the Portfolio's income, expenses, and realized and unrealized gains and losses based on its percentage ownership of the Portfolio's shares of beneficial interest. The Portfolio's Statement of Operations for the period October 1, 2006 through September 19, 2007 is included in Note 9. On September 19, 2007, the Fund, which owned 100% of the Portfolio on that date, withdrew entirely from the Portfolio and received the Portfolio's assets, including securities and cash, and assumed the Portfolio's stated liabilities in exchange for its interest in the Portfolio. Effective September 20, 2007, the Fund began investing directly in the securities in which the Portfolio had invested. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale price on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") is calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Dividends representing a return of capital are reflected as a reduction of cost. Realized gains and losses from securities sold are recorded on the identified cost basis. Income, expenses and realized and unrealized gains and losses allocated from the Portfolio represent the Fund's proportionate share of those items earned by the Portfolio during the period October 1, 2006 through September 19, 2007. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. 16 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Notes to Financial Statements -------------------------------------------------------------------------------- Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences which may result in reclassifications, are primarily due to wash sales, real estate investment trusts and the timing of recognition of realized and unrealized gains and losses on futures contracts. Permanent book and tax basis differences relating to shareholder distributions result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. On July 31, 2007, the Dreyfus Premier Small Cap Equity Fund ("Dreyfus Feeder") withdrew from the master feeder structure via a redemption-in-kind and received currency and securities with unrealized appreciation of $651,693 for the value of their interest in the Portfolio. The Fund realized no gain on this transaction. $1,301,484 of unrealized appreciation had been allocated to that feeder fund. The Fund decreased paid in capital and increased unrealized appreciation on investments by $649,791 to recognize this difference. When realized, this amount will be recognized by the Fund. This reclassification had no impact on the net assets or results of operations of the Fund. D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: Prior to September 20, 2007 the Fund did not directly incur any investment advisory, custody, administration and commitment fees, which were incurred by the Portfolio and allocated to the Fund based on its proportionate interest in the Portfolio. The following disclosures relating to these fees represent fees incurred by the Portfolio for the period prior to September 20, 2007, and by the Fund thereafter. The investment advisory fee paid to TBCAM for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 0.80% of the Fund's, and previously the Portfolio's average daily net assets. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $37,087, for the year ended September 30, 2007. The Trust and previously the Portfolio Trust, entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Portfolio/Fund. For these services the Portfolio/Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $188,462 for the period October 1, 2006 to September 19, 2007 and $5,877 for the period September 20, 2007 to September 30, 2007. 17 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Trust and previously the Portfolio Trust, also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Portfolio/Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, Mellon Bank earned $276,543 for the period October 1, 2006 to September 19, 2007 and $43,829 for the period September 20, 2007 to September 30, 2007. See Note 7 for further details. The Trust and previously the Portfolio Trust, entered into two separate agreements with The Bank of New York that enable the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $3,669 for the period October 1, 2006 to September 19, 2007 and $104 for the period September 20, 2007 to September 30, 2007, which is included in miscellaneous expenses on the statement of operations. See Note 8 for further details. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,241, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $13,019, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was charged $97,276 for fees payable to BNY Mellon Wealth Management. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ------------- ------------- Non-U.S. Government Securities $ 645,421,314 $ 505,994,923 ============= =============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the For the Year Ended Year Ended September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 15,293,689 16,310,078 Shares issued to shareholders in reinvestment of 841,925 464,397 distributions Shares redeemed (6,052,936) (2,415,192) ---------- ---------- Net increase (decrease) 10,082,678 14,359,283 ========== ==========
18 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Notes to Financial Statements -------------------------------------------------------------------------------- At September 30, 2007, two shareholders of record held in the aggregate 31.1% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund received $28,716 in redemption fees. (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code ("Code"). As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact on the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $988,260,273 ============ Gross unrealized appreciation $ 88,814,397 Gross unrealized depreciation (42,446,476) ------------ Net unrealized appreciation (depreciation) 46,367,921 ============ Undistributed ordinary income $ 11,755,487 Undistributed capital gains 33,315,728 ------------ Total distributable earnings $ 45,071,215 ============
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006, was as follows:
2007 2006 ----------- ----------- Ordinary income $16,984,433 $5,056,028 Capital Gains 11,280,912 8,845,849 ----------- ----------- Total Distributions $28,265,345 $13,901,877 =========== ===========
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Futures contracts The Fund, and previously the Portfolio, may enter into financial futures contracts for the purchase or sale of securities, or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized appreciation or depreciation by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to 19 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Notes to Financial Statements -------------------------------------------------------------------------------- increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may also arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Fund enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At September 30, 2007, the Fund held open financial futures contracts. See the Schedule of Investments for further details. (7) Security Lending: The Fund, and previously the Portfolio, may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund, and previously the Portfolio, loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $8,706,327 of which $8,385,955 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $182,538,423 on loan. See Schedule of Investments for further detail on the security positions on loan and collateral held. (8) Line of Credit: On behalf of the Fund and other funds in the Trust, and previously portfolios in the portfolio trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit. During the year ended September 30, 2007, the Fund did not have any loans outstanding. 20 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Notes to Financial Statements -------------------------------------------------------------------------------- (9) Reorganization: Prior to September 19, 2007, the Fund had utilized a Master Feeder Fund structure where the Fund sought to achieve its investment objectives by investing all of its investable assets in the Boston Company Small Cap Value Portfolio. Effective after the close of business on September 19, 2007, the Fund withdrew its assets from the Portfolio by means of a redemption-in-kind and now the Fund invests directly in portfolio securities. Below is the Statement of Operations for The Boston Company Small Cap Value Portfolio for the period October 1, 2006 to September 19, 2007: Investment Income (Note 1B) Dividend income from unaffiliated investments $8,958,792 Dividend income from affiliated investments (Note 1F) 2,193,488 Securities lending income (Note 6) 276,543 Interest income 55,893 ------------ Total Investment Income 11,484,716 Expenses Investment advisory fee (Note 2) $ 6,285,687 Accounting, administration and custody (Note 2) 188,462 Trustees' fees (Note 2) 38,332 Insurance expense 13,103 Professional fees 741 Miscellaneous expenses 7,070 ----------- Total expenses 6,533,395 ------------ Net investment income 4,951,321 ------------ Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 58,918,237 Financial futures transactions (131,760) ----------- Net realized gain (loss) 58,786,477 Change in unrealized appreciation (depreciation) on: Investments 16,990,957 Financial futures contracts 961,908 ----------- Change in net unrealized appreciation (depreciation) 17,952,865 ------------ Net realized and unrealized gain (loss) 76,739,342 ------------ Net Increase in Net Assets from Operations $ 81,690,663 ============
21 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of The Boston Company Small Cap Value Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company Small Cap Value Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 22 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $500 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $4,524 Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 25 None Fund: $500 (63) 9/13/1989 Professor of Political Portfolio: $4,524 c/o Harvard University Economy, Harvard Littauer Center 127 University Cambridge, MA 02138 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $500 P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $4,524 New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $500 c/o Essex Street 11/3/1986 Associates (family Portfolio: $5,123 Associates investment trust office) P.O. Box 5600 Beverly, MA 01915 11/14/43
Interested Trustees* None* * Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 23 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann (46)* President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56)** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. **Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 24 THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6944AR0907 MELLON INSTITUTIONAL FUNDS Annual Report The Boston Company Small Cap Value Fund II -------------------------------------------------------------------------------- July 23, 2007 (commencement of operations) to September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Management Discussion and Analysis -------------------------------------------------------------------------------- Small-cap stocks rallied early in the reporting period amid moderate economic growth, stable short-term interest rates and rising corporate earnings. At the time, investors maintained an ample appetite for risk, which benefited shares of smaller companies more than their larger counterparts. However, the market environment changed dramatically in mid-June 2007, when credit concerns in the sub-prime mortgage sector spread to other areas of the financial markets. In the ensuing market turbulence, newly risk-averse investors engaged in a "flight to quality," and larger, higher-quality companies returned to favor. The Federal Reserve Board attempted to improve market liquidity by reducing key short-term interest rates in August and September. These moves bolstered investor confidence that a recession could be avoided, sparking a market rally late in the reporting period. For the period July 20, 2007 to September 30, 2007, The Boston Company Small Cap Value Fund II returned -4.40% as compared to the fund's benchmark, the Russell 2500 Value Index, which returned 1.04% over the same period. The fund participated to a substantial degree in the small-cap market's advance. The fund achieved particularly strong results among information technology companies, including electron microscope semiconductors maker FEI Company, which gained greater penetration of nanotechnology markets, and Microsemi Corp., which continues to see strong growth in demand for its high performance analog chip. A number of other semiconductor companies in the fund's portfolio also produced strong returns during the reporting period. In the communications equipment industry group, the fund scored successes with consumer networking equipment manufacturer Netgear and telecommunications and military networking specialist Comtech Telecommunications. In the health care sector, home care services provider OptionCare was acquired by pharmacy chain Walgreen, and medical helicopter services contractor Air Methods captured a larger share of hospital and municipal markets. The energy sector led the benchmark's performance during the reporting period, and the fund participated in its strength through holdings such as oil well drilling equipment maker Hydrill, which was acquired by energy services company Quanta Services, and oil and gas operations specialty service provider CARBO Ceramics, which boosted earnings after adding to manufacturing capacity. Among industrial companies, engineering and construction firm Infrasource Services benefited from increased investment in power transmission facilities, and Shaw Group gained value in an improved global environment for the construction of nuclear power plants as more nations develop alternatives to fossil fuels. Conversely, some holdings and industry groups detracted from the fund's performance during the reporting period. For example, regional electric utility PNM Resources was unable to pass along higher commodity costs to its customers, and the fund's underweighted position in the materials sector prevented it from participating fully in the sector's strength as compared to the benchmark. Although our "bottom-up" investment process does not consider macroeconomic trends directly, we are aware that the U.S. economy is in the later stages of its cycle and some market indices recently have set new record highs. In our judgment, our relatively cautious, value-oriented approach to security selection is well positioned for this environment, as it places a high degree of emphasis on characteristics of individual companies such as solid business fundamentals, healthy balance sheets and the ability to generate cash consistently. We recently have found fewer opportunities meeting our criteria among industrial companies, which have reached fuller valuations, and more in the information technology, health care and consumer discretionary areas, which have offered better values after extended periods of underperformance. Joseph M. Corrado, CFA Edward R. Walter, CFA Portfolio Manager Portfolio Manager The Boston Company Asset Management LLC The Boston Company Asset Management LLC
2 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Comparison of Change in Value of $100,000 Investment in The Boston Company Small Cap Value Fund II and the Russell 2500 Value Index (Unaudited) -------------------------------------------------------------------------------- [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
TBC Russell 2500 PERIOD Small Cap Value Fund II Value Index * 7/20/07 100,000 100,000 7/31/07 93,100 92,640 8/31/07 94,100 93,112 9/30/07 95,600 94,080
Aggregate Total Return (for period ended 9/30/2007) -------------------------------------------------------------------------------- Since Inception 7/20/2007 -------------------------------------------------------------------------------- Fund (4.40%)
* Source: Lipper Inc. Aggregate total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 3 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 23, 2007 (commencement of operations) to September 30, 2007. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid During Period+ July 23, 2007 Beginning Ending (commencement of Account Value Account Value operations) July 23, 2007 September 30, 2007 to September 30, 2007 -------------------------------------------------------------------------------------------- Actual $1,000.00 $ 991.66 $1.91 Hypothetical (5% return per year before expenses) $1,000.00 $1,020.05 $5.06
-------- + The Actual expense calculation is equal to the Fund's annualized expense ratio of 1.00%, multiplied by the average account value over the period, multiplied by 70/365 (to reflect the number of days from commencement of operations to September 30, 2007). The Hypothetical expense calculation is equal to the Fund's annualized expense ratio of 1.00%, multiplied by the average account value over the period, multiplied by 183/365. 4 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Portfolio Information as of September 30, 2007 (Unaudited) --------------------------------------------------------------------------------
Percentage of Top Ten Holdings* Sector Investments ----------------------------------------------------------------------------------------------- Invitrogen Corp. Health Care 2.3% Shaw Group, Inc. Industrials 2.0 Ralcorp Holdings, Inc. Consumer Staples 1.9 Longs Drug Stores Corp. Consumer Staples 1.8 Pediatrix Medical Group, Inc. Health Care 1.7 FMC Corp. Materials 1.7 Charles River Laboratories International, Inc. Health Care 1.7 BJ'S Wholesale Club, Inc. Consumer Staples 1.4 Universal Health Services, Inc., Class B Health Care 1.4 Penn Virginia Corp. Energy 1.3 ---- 17.2%
*Excludes short-term securities and investment of cash collateral.
Percentage of Economic Sector Allocation Net Assets -------------------------------------------------------------- Consumer Discretionary 15.0% Consumer Staples 6.0 Energy 5.1 Financials 20.4 Health Care 12.1 Industrials 12.9 Materials 4.2 Technology 17.5 Telecomunication Services 1.0 Utilities 5.5 Short-term and Other Assets 0.3 ----- 100.0%
The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------- UNAFFILIATED INVESTMENTS--104.6% Equities--99.7% Consumer Discretionary--15.0% AnnTaylor Stores Corp. 1,700(a) 53,839 Foot Locker, Inc. 3,270 50,129 Gentex Corp. 3,030 64,963 Jones Apparel Group, Inc. 600 12,678 Jos. A. Bank Clothiers, Inc. 1,310(a) 43,780 Live Nation, Inc. 2,570(a) 54,613 M.D.C. Holdings, Inc. 1,390 56,907 Meredith Corp. 1,100 63,030 New York Times Co., Class A 2,820(b) 55,723 OfficeMax, Inc. 1,770 60,658 Regis Corp. 1,550 49,461 Scholastic Corp. 1,740(a) 60,656 Tenneco, Inc. 1,750(a) 54,268 Timberland Co., Class A 1,480(a) 28,061 Williams-Sonoma, Inc. 2,130(b) 69,481 Zale Corp. 2,320(a,b) 53,685 831,932 Consumer Staples--6.0% BJ'S Wholesale Club, Inc. 2,330(a) 77,263 J.M. Smucker Co. 1,000 53,420 Longs Drug Stores Corp. 1,990 98,843 Ralcorp Holdings, Inc. 1,870(a) 104,383 333,909 Energy--5.1% Cabot Oil and Gas Corp. 970 34,105 CARBO Ceramics, Inc. 1,280 64,934 Oil States International, Inc. 950(a) 45,885 Penn Virginia Corp. 1,700 74,766 Unit Corp. 1,320(a) 63,888 283,578 Financials--20.4% Alexandria Real Estate Equities, Inc.--REIT 480 46,205 American Financial Realty Trust--REIT 3,850 30,992 Aspen Insurance Holdings Ltd. 1,450 40,469 Assured Guaranty Ltd. 1,700 46,189 City National Corp. 940 65,339 Conseco, Inc. 4,150(a) 66,400 Cullen/Frost Bankers, Inc. 1,330 66,660 First Horizon National Corp. 1,000 26,660 Firstmerit Corp. 1,950 38,532 Fulton Financial Corp. 4,720 67,874
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------- Financials (continued) Hanover Insurance Group, Inc. 940 41,539 Health Care, Inc.--REIT 1,290 57,070 Jones Lang Lasalle, Inc. 290(b) 29,800 Lasalle Hotel Properties--REIT 700 29,456 Lexington Realty Trust--REIT 1,940 38,819 Philadelphia Consolidated Holding Corp. 1,400(a) 57,876 Piper Jaffray Cos. 920(a) 49,312 Protective Life Corp. 1,170 49,655 Raymond James Financial, Inc. 1,500 49,275 Redwood Trust, Inc.--REIT 1,380(b) 45,844 Security Capital Assurance Ltd. 2,010 45,908 Strategic Hotels and Resorts, Inc.--REIT 1,610 33,150 Washington Federal, Inc. 2,010 52,783 Wilmington Trust Corp. 1,340 52,126 1,127,933 Health Care--12.1% Charles River Laboratories International, Inc. 1,660(a) 93,209 Endo Pharmaceuticals Holdings, Inc. 850(a) 26,358 Healthsouth Corp. 1,230(a) 21,537 Invitrogen Corp. 1,580(a) 129,133 Lifepoint Hospitals, Inc. 1,600(a) 48,016 Magellan Health Services, Inc. 1,080(a) 43,826 MDS, Inc. 2,250 48,488 Medicines Co. 1,400(a) 24,934 Pediatrix Medical Group, Inc. 1,470(a) 96,167 PerkinElmer, Inc. 2,240 65,430 Universal Health Services, Inc., Class B 1,380 75,100 672,198 Industrials--12.9% Alliant Techsystems, Inc. 500(a) 54,650 Brink's Co. 1,000 55,880 Clean Harbors, Inc. 960(a) 42,739 Corrections Corp. of America 2,160(a) 56,527 Curtiss-Wright Corp. 900 42,750 Esterline Technologies Corp. 810(a) 46,211 Granite Construction, Inc. 690 36,584 IKON Office Solutions, Inc. 4,100 52,685 MSC Industrial Direct Co. Inc., Class A 1,030 52,108 Shaw Group, Inc. 1,900(a) 110,390 Steelcase, Inc., Class A 3,460 62,211 Thomas & Betts Corp. 640(a) 37,530 Waste Connections, Inc. 2,160(a) 68,602 718,867
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------- Materials--4.2% Cytec Industries, Inc. 760 51,976 FMC Corp. 1,800 93,636 International Flavors and Fragrances, Inc. 520(b) 27,487 Reliance Steel & Aluminum Co. 1,100 62,194 235,293 Technology--17.5% Aspen Technology, Inc. 1,000(a) 14,320 Avid Technology, Inc. 1,310(a) 35,475 Brocade Communications Systems, Inc. 5,600(a) 47,936 Comtech Telecommunications Corp. 670(a) 35,838 CSG Systems International, Inc. 1,900(a) 40,375 Cymer, Inc. 590(a) 22,650 Electronics for Imaging, Inc. 2,080(a) 55,869 Emulex Corp. 2,720(a) 52,142 Fair Issac Corp. 1,240 44,776 FEI Co. 500(a) 15,715 Foundry Networks, Inc. 2,180(a) 38,739 Hewitt Associates, Inc., Class A 1,260(a) 44,163 Ingram Micro, Inc., Class A 2,950(a) 57,850 Integrated Device Technology, Inc. 3,190(a) 49,381 Microsemi Corp. 2,260(a) 63,009 MKS Instruments, Inc. 1,100(a) 20,922 Net Gear, Inc. 1,500(a) 45,630 Parametric Technology Corp. 2,220(a) 38,672 Perot Systems Corp., Class A 1,390(a) 23,505 Powerwave Technologies, Inc. 6,350(a) 39,116 Semtech Corp. 1,950(a) 39,936 SRA International, Inc., Class A 1,770(a) 49,702 Sybase, Inc. 2,330(a) 53,893 Teradyne, Inc. 3,340(a) 46,092 975,706 Telecommunication Services--1.0% Cincinnati Bell, Inc. 10,700(a) 52,858 Utilities--5.5% AGL Resources, Inc. 1,590 62,996 Atmos Energy Corp. 1,840 52,109 Black Hills Corp. 1,030 42,251 Hawaiian Electric Industries, Inc. 1,740 37,775
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Schedule of Investments--September 30, 2007 --------------------------------------------------------------------------------
Value ($) Security Shares (Note 1A) ----------------------------------------------------------------------------------------------- Utilities (continued) PNM Resources, Inc. 2,430 56,570 Portland General Electric Co. 990 27,522 UGI Corp. 1,130 29,357 308,580 Total Equities (Cost $5,731,841) 5,540,854 INVESTMENT OF CASH COLLATERAL--4.9% BlackRock Cash Strategies L.L.C. (Cost $274,750) 274,750 274,750 TOTAL UNAFFILIATED INVESTMENTS (Cost $6,006,591) 5,815,604 AFFILIATED INVESTMENTS--2.8% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $153,621) 153,621(c) 153,621 --------- TOTAL INVESTMENTS--107.4% (Cost $6,160,212) 5,969,225 LIABILITIES IN EXCESS OF OTHER ASSETS--(7.4%) (409,014) --------- NET ASSETS--100% 5,560,211 =========
Notes to Schedule of Investments: REIT--Real Estate Investment Trust (a) Non-income producing security. (b) Security, or a portion of thereof, was on loan at September 30, 2007. (c) Affiliated institutional money market fund. The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Statement of Assets and Liabilities September 30, 2007 -------------------------------------------------------------------------------- Assets Investment in securities, at value (Note 1A) (including securities on loan, valued at $263,508 (Note 6)): Unaffiliated investments (cost $6,006,591) $5,815,604 Affiliated investments (Note 1F) (cost $153,621) 153,621 Cash 40 Receivable for investments sold 62,212 Interest and dividends receivable 6,186 Prepaid expenses 10,915 ---------- Total assets 6,048,578 Liabilities Collateral for securities on loan (Note 6) $ 274,750 Payable for investments purchased 162,106 Accrued professional fees 32,787 Accrued accounting, custody, administration and transfer agent fees (Note 2) 12,267 Accrued investment advisory fee 1,951 Accrued trustees' fees (Note 2) 1,100 Accrued chief compliance officer fee (Note 2) 364 Accrued shareholder reporting fee (Note 2) 97 Other accrued expenses and liabilities 2,945 --------- Total liabilities 488,367 ---------- Net Assets $5,560,211 ========== Net Assets consist of: Paid-in capital $5,816,968 Accumulated net realized loss (70,697) Undistributed net investment income 4,927 Net unrealized depreciation (190,987) ---------- Total Net Assets $5,560,211 ========== Shares of beneficial interest outstanding 290,848 ========== Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 19.12 ==========
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Statement of Operations For the Period July 23, 2007 (commencement of operations) to September 30, 2007 -------------------------------------------------------------------------------- Investment Income (Note 1B) Dividend income from unaffiliated investments $ 13,613 Dividend income from affiliated investments (Note 1F) 2,262 Securities lending income (Note 6) 709 --------- Total investment income 16,584 Expenses Investment advisory fee (Note 2) $ 7,841 Professional fees 35,945 Accounting, custody, administration and transfer agent fees (Note 2) 12,267 Registration fees 8,076 Trustees' fees and expenses (Note 2) 1,125 Miscellaneous expenses 6,330 -------- Total expenses 71,584 Deduct: Waiver of investment advisory fee (Note 2) (7,841) Reimbursement of Fund operating expenses (Note 2) (53,288) -------- Total expense deduction (61,129) -------- Net Expenses 10,455 --------- Net investment income 6,129 --------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (71,899) Change in unrealized appreciation (depreciation) on: Investments (190,987) --------- Net realized and unrealized gain (loss) on investments (262,886) --------- Net Decrease in Net Assets from Operations $(256,757) =========
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Statement of Changes in Net Assets --------------------------------------------------------------------------------
For the period July 23, 2007 (commencement of operations) to September 30, 2007 ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 6,129 Net realized gain (loss) (71,899) Change in net unrealized appreciation (depreciation) (190,987) ---------- Net increase (decrease) in net assets from investment operations (256,757) ---------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 5,816,968 ---------- Total Increase in Net Assets 5,560,211 Net Assets At beginning of period -- ---------- At end of period (including undistributed net investment income of $4,927) $5,560,211 ==========
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Financial Highlights --------------------------------------------------------------------------------
For the period July 23, 2007 (commencement of operations) to September 30, 2007 ------------------ Net Asset Value, Beginning of Period $ 20.00 From Operations: Net investment income * (a) 0.02 Net realized and unrealized gains (loss) on investments (0.90) --------- Total from operations (0.88) --------- Net Asset Value, End of Period $ 19.12 ========= Total Return (b) (4.40)%(d) Ratios/Supplemental data: Expenses (to average daily net assets)* 1.00%(c) Net Investment Income (to average daily net assets)* 0.59%(c) Portfolio Turnover 18%(d) Net Assets, End of Period (000's omitted) $ 5,560 -------- * For the period indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios excluding waivers and reimbursements would have been: Net investment (loss) per share (a) $ (0.19) Ratios (to average daily net assets): Expenses 6.85%(c) Net investment income loss (5.27)%(c) (a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) Computed on an annualized basis. (d) Not annualized. Returns for periods of less than one year have not been annualized.
13 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Value Fund II (the "Fund"), which commenced operation on July 23, 2007, is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of small cap U.S. companies. The Fu-nd focuses on companies with total market capitalizations within the range of companies included in the Russell 2500 Value Index. The Fund intends to maintain an average weighted market capitalization that approximates that of the Russell 2500 Value Index. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 14 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Notes to Financial Statements ------------------------------------------------------------------------------- D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. F. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. G. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to TBCAM for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 0.75% of the Fund's average daily net assets. TBCAM voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 1.00% of the Fund's average daily net assets for the period July 23, 2007 (commencement of operations) to September 30, 2007. For the period July 23, 2007 (commencement of operations) to September 30, 2007, TBCAM voluntarily waived its investment advisory fee in the amount of $7,841 and reimbursed the Fund for $53,288 of its operating expenses. This arrangement is voluntary and temporary and may be discontinued or revised by TBCAM at any time. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $1,355, for the period July 23, 2007 (commencement of operations) to September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $10,912 for the period July 23, 2007 (commencement of operations) to September 30, 2007. The Trust also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, the Fund was charged $303 for the period July 23, 2007 (commencement of operations) to September 30, 2007. See Note 6 for further details. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $20 for the period July 23, 2007 (commencement of operations) to September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. See Note 7 for further details. 15 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Notes to Financial Statements -------------------------------------------------------------------------------- The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the period July 23, 2007 (commencement of operations) to September 30, 2007, the Fund was charged $1,091, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $97, which amount is included in miscellaneous expenses in the statement of operations, for the period July 23, 2007 (commencement of operations) to September 30, 2007. The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the period July 23, 2007 (commencement of operations) to September 30, 2007, the Fund was not charged an administrative service fee by an affiliate of BNY Mellon. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the period July 23, 2007 (commencement of operations) to September 30, 2007 were as follows:
Purchases Sales ----------- ---------- Non-U.S. Government Securities $ 6,797,232 $ 993,492 ----------- ----------
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the period July 23, 2007 (commencement of operations) to September 30, 2007 ------------------ Shares sold 290,848 ------- Net increase (decrease) 290,848 =======
At September 30, 2007, three shareholders of record held in the aggregate 94% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the period July 23, 2007 (commencement of operations) to September 30, 2007, the Fund did not assess any redemption fees. 16 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Notes to Financial Statements ------------------------------------------------------------------------------- (5) Federal Taxes: The Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact on the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $ 6,160,390 ============== Gross unrealized appreciation $ 167,556 Gross unrealized depreciation (358,721) ------------- Net unrealized appreciation (depreciation) $ (191,165) ============== Undistributed ordinary income $ 4,581 Undistributed capital gains -- -------------- Total distributable earnings $ 4,581 ==============
The Fund elected to defer to its fiscal year ending September 30, 2008, $70,173 of capital losses recognized during the period July 23, 2007 to September 30, 2007. (6) Security Lending: The Fund may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund loaned securities during for the period July 23, 2007 (commencement of operations) to September 30, 2007 and earned interest on the invested collateral of $1,729 of which $1,020 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $263,508 on loan. See Schedule of Investments for further detail on the security positions on loan and collateral held. (7) Line of Credit: On behalf of the Fund, and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit.For the period July 23, 2007 (commencement of operations) to September 30, 2007, the Fund had average borrowings outstanding of $4,000 for a total of one day and incurred $0 of interest expense. At September 30, 2007, the Fund did not have a loan balance outstanding. 17 Mellon Institutional Funds Investment Trust The Boston Company Small Cap Value Fund II Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of The Boston Company Small Cap Value Fund II: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company Small Cap Value Fund II (the "Fund") at September 30, 2007, and the results of its operations, the changes in its net assets and the financial highlights for the period from July 23, 2007 (commencement of operations) through September 30, 2007, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 18 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ----------------------------------------------------------------------------------------------------------------------------------- Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $0 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $0 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $0 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $0 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* *Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 19
Principal Officers who are Not Trustees Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years --------------------------------------------------------------------------------------------------------------------------------- Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. ** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 20 THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6943AR0907 MELLON INSTITUTIONAL FUNDS Annual Report The Boston Company Emerging Markets Core Equity Fund -------------------------------------------------------------------------------- Year ended September 30, 2007 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the Fund's portfolio holdings, view the most recent quarterly holdings report, semi-annual report or annual report on the Fund's web site at http://www.melloninstitutionalfunds.com. To view the Fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30 visit http://www.melloninstitutionalfunds.com or the SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of the proxy voting guidelines. MELLON INSTITUTIONAL FUNDS September 2007 Dear Mellon Institutional Fund Shareholder: Enclosed you will find your Fund's annual report for the fiscal year ended September 30, 2007. The financial markets experienced a major bout of volatility in the summer stemming from two principal sources: troubles in the credit markets related to the difficulties experienced by mortgage securities backed by sub-prime loans, and the high degree of leverage employed by many hedge funds, whose impact on the markets has swollen significantly over the past decade. From its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to close the quarter at just under its peak for the 12-month period, resulting in an 11.8% return over that period. Part of the rebound was due to the September 18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended a string of nine consecutive meetings in which the Fed left rates unchanged. The reduction was 25 basis points greater than anticipated, driven by the Fed's concerns over the housing recession and tighter credit availability. Credit markets responded to the sub-prime troubles with a broad-based flight to quality as investors fled to short-term Treasury securities. One result was a significant steepening of the yield curve, as the yield on the 2-year Treasury note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads widened in the corporate bond sector compared to Treasury issues, which has the effect of making corporate borrowing more expensive. In another indication of just how disruptive this period was in the credit markets, even some issuers of commercial paper - typically viewed as the safest segment of the corporate market - had trouble issuing or rolling over their issues. While liquidity has slowly returned to the bond markets in general, the mortgage sector clearly has been shaken, and this will likely exacerbate the housing recession as financing becomes more expensive. In the view of some, the likelihood of a broader U.S. recession has become greater. Our view is that a period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted by the weaker dollar, multi-year global economic expansion and monetary growth, and high corporate profitability - especially for multinational franchises - as being positives that partially offset the drag of the housing sector and lower consumption. We wish to thank you for your business and confidence in Mellon Institutional Funds. Please feel free to contact us with questions or comments. Sincerely, Barbara McCann President 1 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Management Discussion and Analysis -------------------------------------------------------------------------------- For the year ended September 30, 2007, The Boston Company Emerging Markets Core Equity Fund had a total return of 63.3% and outperformed its benchmark, the MSCI Emerging Market Index, which returned 58.6%. During this period, emerging stocks continued to post strong returns, outperforming their developed market peers. Returns for the Index have been, in part, driven by China which surged over 130% during the period. Peru (+132.3%), Brazil (+98.1%), Turkey (+86.3%), and Hungary (+64.3%) rounded out the top five. Jordan was the only negatively performing country in the Index and fell -8.8%. South Korea, the second largest weighted country in the Index after China, (15.5%), returned a robust 45.7%. The portfolio's positive return relative to its benchmark index was driven by strong stock selection in South Korea, Russia and Malaysia. South Korean Hyundai Heavy (+240.6%), Norilsk Nickel Mining of Russia (+118.5%), and Malaysian RHB Capital (+133.6%) were the biggest contributors within those countries. Conversely, we had weak stock selection in India as we trailed the benchmark's return by 25.8%. The Fund experienced positive stock selection in 9 of the 10 sectors. Materials was the top performing sector as the Fund outpaced the Index return by 25.0% as CVRD (+130.6) and Asia Cement (+168.7%) drove returns in this sector. Strong stock selection in the Telecommunication Services and Consumer Staples sectors also added 202 and 137 basis points respectively. On the other hand, we had weak stock selection in the Health Care sector as the Fund's return of 21.6% trailed the Index's return of 25.5%. Emerging markets have had a remarkable run and given the projected growth of the region, the outlook for the asset class is still positive. Financial volatility ignited by the U.S. sub- prime mortgage fallout could extend further into the end of this year. The extent to which tighter credit, rising loan delinquencies and a chronically weak housing market hit overall U.S. consumption remains to be seen. Although emerging markets remain financially sound and less dependant on global demand than in previous economic cycles, a major decline in U.S. GDP growth could hamper the robust expansion taking place in developing countries. As always, we remain disciplined in our investment philosophy as we believe the best opportunity is through stock selection. We will continue to use both quantitative and fundamental techniques to buy stocks that we consider to combine improving business momentum and attractive valuations. William S. Patzer, CFA Portfolio Manager The Boston Company Asset Management, LLC 2 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Comparison of Change in Value of $100,000 Investment in The Boston Company Emerging Markets Core Equity Fund and the Morgan Stanley Capital International Emerging Markets Index (Unaudited) -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS A REPRESENTATION OF A LINE CHART IN THE PRINTED MATERIAL]
TBC Morgan Stanley Emerging Markets Capital International PERIOD Core Equity Fund Emerging Markets Index * 7/10/06 100,000 100,000 9/30/06 102,750 103,719 12/31/06 122,054 122,010 3/31/07 126,027 124,873 6/30/07 147,150 143,667 9/30/07 167,739 164,528
Average Annual Total Returns (for period ended 9/30/2007) --------------------------------------------------------------------------------
Since Inception 1 Year 7/10/06 -------------------------------------------------------------------------------- Fund 63.25% 52.84%
* Source: Lipper Inc. Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains. The $100,000 line graph and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by the fund's investment adviser (if applicable), the fund's total return will be greater than it would be had the reimbursement not occurred. Past performance is not predictive of future performance. 3 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Shareholder Expense Example (Unaudited) -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2007 to September 30, 2007). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000.00=8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value April 1, 2007 April 1, 2007 September 30, 2007 to September 30, 2007 ------------------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,331.00 $8.47 Hypothetical (5% return per year before expenses) $1,000.00 $1,017.80 $7.33
---------- + Expenses are equal to the Fund's annualized expense ratio of 1.45%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). 4 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund
Portfolio Information as of September 30, 2007 (Unaudited) ------------------------------------------------------------------------------------------------------- Percentage of Top Ten Holdings* Country Sector Investments ------------------------------------------------------------------------------------------------------- Companhia Vale do Rio Doce Preferred A Brazil Materials 3.5% Ishares MSCI Emerging Markets Index N/A N/A 2.8 JSC MMC Norilsk Nickel ADR Russia Materials 2.6 Asia Cement Corp. Taiwan Materials 2.6 China Mobile Ltd. Hong Kong Telecommunication 2.6 Oao Gazprom ADR Russia Energy 2.4 Ping An Insurance Group Co. China Financials 2.2 China Petroleum & Chemical Corp. China Energy 2.1 Usinas Siderurgicas de Minas Gerais SA Preferred Brazil Materials 2.0 Hyundai Heavy Industries South Korea Industrials 2.0 ---- 24.8%
* Excludes short-term securities and investment of cash collateral.
Percentage of Geographic Region Allocation* Investments -------------------------------------------------------------------------------- Europe ex U.K. 12.0% Asia ex Japan 59.0 Americas ex U.S. 18.0 Middle East/Africa 11.0 ----- 100.0%
* Excludes short-term securities and cash collateral investments. The Fund is actively managed. Current holdings may be different than those presented above. 5 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--September 30, 2007 ------------------------------------------------------------------------------------------------------------ Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------ UNAFFILIATED INVESTMENTS-- 100.0% Equities--95.3% Brazil--12.7% Banco DO Brasil SA 14,300 $241,117 Brasil Telecom SA Preferred 18,400 173,755 Companhia de Bebidas das Americas ADR 1,600 117,008 Companhia Paranaense de Energia-Copel Preferred 10,300 164,733 Companhia Vale do Rio Doce Preferred A 16,600 472,991 Perdigao SA 3,900 85,132 Petroleo Brasileiro SA Preferred 2,200 71,092 Sadia SA Preferred 12,400 68,904 Uniao de Bancos Brasileiros SA 5,200 68,945 Usinas Siderurgicas de Minas Gerais SA Preferred 3,800 265,502 1,729,179 Chile--0.5% Lan Airlines SA ADR 4,500 72,225 China--7.4% Bank of China Ltd. 211,000 112,947 China Petroleum & Chemical Corp. 228,000 284,875 Huaneng Power International, Inc. 54,000 74,627 Ping An Insurance Group Co. 21,000 290,758 Shanda Interactive Entertainment Ltd, ADR 2,800 (a,b) 104,188 Yanzhou Coal Mining Co., Ltd. 69,000 142,059 1,009,454 Czech Republic--0.5% CEZ 1,073 66,053 Egypt--0.9% Commercial International Bank 4,808 65,942 Telecom Egypt 19,147 58,299 124,241 Hong Kong--7.8% China Mobile Ltd. 21,000 343,992 China Shipping Container Lines Co., Ltd. 159,650 123,876 Datang International Power Generation Co., Ltd. 82,000 94,225 Harbin Power Equipment Co., Ltd. 36,000 90,239 Industrial and Commercial Bank of China 259,000 181,634 Shenzhen Investment Ltd. 161,000 143,776 Weiqiao Textile Co., Ltd. 48,000 90,177 1,067,919 Hungary--0.8% MOL Hungarian Oil and Gas Nyrt 646 104,745
The accompanying notes are an integral part of the financial statements. 6 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--September 30, 2007 ------------------------------------------------------------------------------------------------------------ Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------ India--5.1% Bharat Petroleum Corp., Ltd. 10,488 93,208 Bharti Airtel Ltd. 2,722 (a) 62,534 Grasim Industries Ltd. 2,616 223,097 Hindustan Petroleum Corp., Ltd. 11,460 76,798 Larsen & Toubro Ltd. 1,400 97,745 Oil and Natural Gas Corp., Ltd. 3,443 81,856 Rolta India Ltd. 4,700 (a) 67,094 702,332 Indonesia--1.5% PT Astra Agro Lestari Tbk 51,000 93,742 PT Bank Pan Indonesia Tbk 728,000 (a) 55,755 PT Gudang Garam Tbk 59,000 60,678 210,175 Israel--2.6% Bank of Hapoalim BM 23,120 118,077 Check Point Software Technologies Ltd. 2,500 (a) 62,950 Teva Pharmaceutical ADR 4,000 177,880 358,907 Malaysia--2.7% Bumiputra-Commerce Holdings BHD 30,000 94,273 Digi.com BHD 23,700 149,648 RHB Capital BHD 69,100 121,762 365,683 Mexico--3.9% Alfa SA de CV 21,100 142,815 America Movil SA ADR 2,630 168,320 Fomento Economico Mexicano ADR 3,900 145,860 Grupo Aeroportuario del Sureste 16,200 80,430 537,425 Poland--1.9% BRE Bank SA 895 (a) 173,073 Polskie Gornictwo Naftowe I Gazownictwo SA 43,200 82,231 255,304 Russia--8.3% JSC MMC Norilsk Nickel ADR 1,300 353,600 Lukoil ADR 2,600 216,060 Mechel ADR 1,800 91,800 Mobile TeleSystems ADR 2,150 149,017 Oao Gazprom ADR 7,300 321,930 1,132,407
The accompanying notes are an integral part of the financial statements. 7 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--September 30, 2007 ------------------------------------------------------------------------------------------------------------ Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------ South Africa--7.0% ABSA Group Ltd. 3,728 67,930 Investec Ltd. 7,671 82,737 Metropolitan Holdings Ltd. 35,218 78,034 Mittal Steel South Africa Ltd. 9,406 187,914 Murray & Roberts Holdings Ltd. 9,500 (b) 124,442 Remgro Ltd. 3,992 101,837 Telkom SA Ltd. 5,968 150,940 Tiger Brands Ltd. 2,700 71,574 Truworths International Ltd. 20,297 93,526 958,934 South Korea--15.9% GS Engineering and Construction Corp. 435 75,598 Honam Petrochemical Corp. 764 126,095 Hyundai Department Store Co., Ltd. 813 97,748 Hyundai Heavy Industries 570 263,537 Industrial Bank of Korea 4,880 105,345 Jusung Engineering Co., Ltd. 3,680 (a) 108,200 Korea Electric Power Corp. 1,130 52,986 KT&G Corp. 964 75,337 LG Chem Ltd. 700 73,451 LG Electronics, Inc. 1,645 153,730 LG Philips LCD Co., Ltd. 2,430 (a) 116,334 POSCO 275 202,290 Samsung Electronics Co., Ltd. 317 199,229 Shinhan Financial Group Co., Ltd. 2,628 171,772 SK Energy Co., Ltd. 1,003 (a) 175,407 SK Holdings Co., Ltd. 410 87,387 Woori Finance Holdings Co., Ltd. 3,750 85,665 2,170,111 Taiwan--11.4% Asia Cement Corp. 199,411 347,732 Asustek Computer, Inc. 32,000 97,383 Chi Mei Optoelectronics Corp. 98,400 114,292 Compal Electronics, Inc. 82,410 93,194 D-Link Corp. 24,760 61,464 First Financial Holding Co., Ltd. 97,920 70,071 Hung Poo Real Estate Development Corp. 76,760 75,984 MediaTek, Inc. 11,550 208,134 Powertech Technology, Inc. 14,400 58,033 Siliconware Precision Industries Co. 53,000 119,384 Taiwan Semiconductor Manufacturing Co., Ltd. ADR 6,833 69,150 Tong Yang Industry Co., Ltd. 55,770 64,435
The accompanying notes are an integral part of the financial statements. 8 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--September 30, 2007 ------------------------------------------------------------------------------------------------------------ Value ($) Security Shares (Note 1A) ------------------------------------------------------------------------------------------------------------ Taiwan (continued) Wistron Corp. 62,757 113,474 Yuanta Financial Holding Co., Ltd. 114,200 (a) 69,997 1,562,727 Thailand--1.5% Electricity Generating Public Co., Ltd. 12,200 43,426 Thai Airways International Public Company Ltd. 62,700 81,769 Thai Oil Public Co., Ltd. 28,200 76,264 201,459 Turkey--2.9% Anadolu Efes Biracilik ve Malt Sanayii AS 6,040 63,131 Selcuk Ecza Deposu Ticaret ve Sanayi AS 30,300 (a) 67,361 Tupras-Turkiye Petrol Rafine AS 3,993 105,994 Turkcell Iletisim Hizmetleri AS 18,960 160,425 396,911 TOTAL EQUITIES (Cost $9,371,524) 13,026,191 EXCHANGE TRADED FUNDS--2.7% Ishares MSCI Emerging Markets Index 2,520 (a,c) 376,614 Total Exchange Traded Funds (Cost $324,152) INVESTMENT OF CASH COLLATERAL--2.0% BlackRock Cash Strategies L.L.C. (Cost $271,348) 271,348 271,348 TOTAL UNAFFILIATED INVESTMENTS (Cost $9,967,024) 13,674,153 AFFILIATED INVESTMENTS --1.5% Dreyfus Institutional Preferred Plus Money Market Fund (Cost $206,450) 206,450 (d) 206,450 ---------- TOTAL INVESTMENTS--101.5% (Cost $10,173,474) 13,880,603 LIABILITIES IN EXCESS OF OTHER ASSETS--(1.5%) (209,649) ---------- NET ASSETS--100% 13,670,954 ==========
Notes to Schedule of Investments: ADR--American Depository Receipts (a) Non-income producing security. (b) Purchased on a delayed delivery basis. (c) Security, or a portion of thereof, was on loan at September 30, 2007. (d) Affiliated institutional money market fund. The accompanying notes are an integral part of the financial statements. 9 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Schedule of Investments--September 30, 2007 -------------------------------------------------------------------------------- At September 30, 2007 the Fund held the following forward foreign currency exchange contracts:
Local Principal Contract Value at USD Amount Unrealized Contracts to Receive Amount Value Date September 30, 2007 to Deliver Appreciation ------------------------------------------------------------------------------------------------------------------------------- South African Rand 201,411 10/2/2007 $29,360 $29,236 $ 124 -----
Percentage of Economic Sector Allocation Net Assets ----------------------------------------------------------- Consumer Discretionary 3.7% Consumer Staples 5.7 Energy 14.0 Financials 18.9 Health Care 1.8 Industrials 8.4 Information Technology 11.6 Materials 17.2 Telecommunication Services 10.4 Utilities 3.6 Exchange Traded Funds 2.7 Short-term and Other Assets 2.0 ----- 100.0%
The accompanying notes are an integral part of the financial statements. 10 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Statement of Assets and Liabilities September 30, 2007 --------------------------------------------------------------------------------
Assets Investments in securities, at value (Note 1A) (including securities on loan, valued at $277,977 (Note 7)): Unaffiliated investments (cost $9,967,024) $13,674,153 Affiliated investments (Note 1H) (cost $206,450) 206,450 Cash 906 Foreign currency, at value (cost $104,157) 106,263 Receivable for investments sold 58,413 Interest and dividends receivable 18,946 Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 124 Prepaid expenses 7,542 ----------- Total assets 14,072,797 Liabilities Collateral for securities on loan (Note 7) $ 271,348 Payable for investments purchased 62,759 Accrued professional fees 39,330 Accrued accounting, custody, administration and transfer agent fees (Note 2) 23,865 Accrued trustees' fees (Note 2) 1,218 Accrued chief compliance officer fee (Note 2) 367 Accrued shareholder reporting fee (Note 2) 146 Other accrued expenses and liabilities 2,810 --------- Total liabilities 401,843 ----------- Net Assets $13,670,954 =========== Net Assets consist of: Paid-in capital $9,033,732 Accumulated net realized gain 859,175 Undistributed net investment income 67,966 Net unrealized appreciation 3,710,081 ----------- Total Net Assets $13,670,954 =========== Shares of beneficial interest outstanding 411,253 =========== Net Asset Value, offering and redemption price per share (Net Assets/Shares outstanding) $ 33.24 ===========
The accompanying notes are an integral part of the financial statements. 11 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Statement of Operations For the Year Ended September 30,2007 --------------------------------------------------------------------------------
Investment Income (Note 1B) Dividend income from unaffiliated investments (net of foreign withholding taxes $29,269) $ 224,023 Dividend income from affiliated investments (Note 1H) 7,416 Securities lending income (Note 7) 5,334 ---------- Total investment income 236,773 Expenses Investment advisory fee (Note 2) $ 99,997 Accounting, custody, administration and transfer agent fees (Note 2) 102,558 Professional fees 37,578 Registration fees 25,414 Trustees' fees and expenses (Note 2) 2,875 Miscellaneous expenses 21,765 ---------- Total expenses 290,187 Deduct: Waiver of investment advisory fee (Note 2) (99,997) Reimbursement of Fund operating expenses (Note 2) (58,342) ---------- Total expense deduction (158,339) ---------- Net Expenses 131,848 ---------- Net investment income 104,925 ---------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 914,516 Foreign currency transactions and forward foreign currency exchange transactions 6,174 ---------- Net realized gain (loss) 920,690 Change in unrealized appreciation (depreciation) on: Investments 3,538,096 Foreign currency translations 2,995 ---------- Change in net unrealized appreciation (depreciation) 3,541,091 ---------- Net realized and unrealized gain (loss) on investments 4,461,781 ---------- Net Increase in Net Assets from Operations $4,566,706 ==========
The accompanying notes are an integral part of the financial statements. 12 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Statements of Changes in Net Assets --------------------------------------------------------------------------------
For the period July 10, 2006 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------ ------------------ Increase (Decrease) in Net Assets: From Operations Net investment income (loss) $ 104,925 $ 15,955 Net realized gain (loss) 920,690 (35,973) Change in net unrealized appreciation (depreciation) 3,541,091 168,990 ----------- ---------- Net increase (decrease) in net assets from investment operations 4,566,706 148,972 ----------- ---------- Distributions to Shareholders (Note 1C) From net investment income (78,456) -- ----------- ---------- Total distributions to shareholders (78,456) -- ----------- ---------- Fund Share Transactions (Note 4) Net proceeds from sale of shares 3,722,363 5,544,154 Value of shares issued to shareholders in reinvestment of distributions 73,536 -- Cost of shares redeemed (306,321) -- ----------- ---------- Net increase (decrease) in net assets from Fund share transactions 3,489,578 5,544,154 ----------- ---------- Total Increase (Decrease) in Net Assets 7,977,828 5,693,126 Net Assets At beginning of year 5,693,126 -- ----------- ---------- At end of year (including net investment income of $67,966 and $35,323, $13,670,954 $5,693,126 respectively) =========== ==========
The accompanying notes are an integral part of the financial statements. 13 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Financial Highlights --------------------------------------------------------------------------------
For the period July 10, 2006 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------ ------------------ Net Asset Value, Beginning of Year $20.55 $20.00 ------ ------ From Operations: Net investment income (loss) (a) 0.31 0.06 Net realized and unrealized gains (loss) on investments 12.62 0.49 ------ ------ Total from operations 12.93 0.55 ------ ------ Less Distributions to Shareholders: From net investment income (0.24) -- ------ ------ Total distributions to shareholders (0.24) -- ------ ------ Net Asset Value, End of Year $33.24 $20.55 ====== ====== Total Return (b) 63.25% 2.75%(d) Ratios/Supplemental data: Expenses (to average daily net assets)* 1.45% 1.45%(c) Net Investment Income (to average daily net assets)* 1.15% 1.31%(c) Portfolio Turnover 76% 31%(d) Net Assets, End of Year (000's omitted) $13,671 $5,693 ---------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income (loss) per share and the ratios, without waivers and reimbursement, would have been: Net investment income (loss) per share (a) $(0.16) $(0.27) Ratios (to average daily net assets): Expenses 3.18% 8.64%(c) Net investment income (loss) (0.59%) (5.88%)(c)
(a) Calculated based on average shares outstanding. (b) Total return would have been lower in the absence of expense waivers. (c) Calculated on an annualized basis. (d) Not annualized. Returns for periods of less than one year have not been annualized. The accompanying notes are an integral part of the financial statements. 14 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- (1) Organization and Significant Accounting Policies: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Emerging Markets Core Equity Fund (the "Fund"), which commenced operation on July 10, 2006, is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of companies that are located in foreign countries represented in the Morgan Stanley Capital International Emerging Market (MSCI EM) Index. The Fund may also enter into equity index futures contracts based primarily on the indices of the countries included in the MSCI EM Index and Canada. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Investment security valuations Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE") is open. Securities are valued at the last sale prices on the exchange or national securities market on which they are primarily traded. Securities not listed on an exchange or national securities market, or securities for which there were no reported transactions, are valued at the last calculated mean price (average of last bid and last offer). Securities that are fixed income securities, other than short-term instruments with less than sixty days remaining to maturity, for which accurate market prices are readily available, are valued at their current market value on the basis of quotations, which may be furnished by a pricing service or dealers in such securities. Securities (including illiquid securities) for which quotations are not readily available, or if such quotations do not accurately reflect fair value, are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. With respect to any portion of the Fund's assets that are invested in one or more open-end regulated investment companies ("RICs"), the Fund's net asset value ("NAV") will be calculated based upon the NAVs of such RICs. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers, including counterparties or pricing services. Because foreign markets may be open at different times than the NYSE, the value of the Fund's shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect the events that occur after such close but before the close of the NYSE. If market quotations are not readily available or do not accurately reflect fair value, or the value of a security has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), the Fund may value its assets by a method the Trustees believe accurately reflects the fair value. The Trustees have adopted fair value pricing procedures, which, among other things, require the Fund to fair value such securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised by the Trustees from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices for foreign securities will be used by the Fund to a significant extent. Short-term instruments with less than sixty days remaining to maturity are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized cost based upon the value on such date unless the Trustees determine during such sixty-day period that amortized cost does not represent fair value. B. Securities transactions and income Securities transactions are recorded as of trade date. Interest income is determined on the basis of coupon interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities with greater than sixty days remaining to maturity. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. 15 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- C. Distributions to shareholders Distributions to shareholders are recorded on the ex-dividend date. The Fund's distributions from capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications, are primarily due to differing treatments for foreign currency transactions and losses deferred due to wash sales and post-October losses. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid in capital. Undistributed net investment income (loss) and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will be distributed in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. D. Expenses The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated among the funds of the Trust taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. Foreign currency transactions The Fund maintains its books and records in U.S. dollars. Investment security valuations and other assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. F. Foreign investment risk There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. G. Commitments and contingencies In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. H. Affiliated issuers Affiliated issuers are investment companies advised by The Boston Company Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates. 16 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- I. New accounting requirements On September 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 157 and its impact, if any, in the financial statements has not yet been determined. (2) Investment Advisory Fee and Other Transactions With Affiliates: The investment advisory fee paid to TBCAM for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 1.10% of the Fund's average daily net assets. TBCAM voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 1.45% of the Fund's average daily net assets for the year ended September 30, 2007. Pursuant to this agreement, for the year ended September 30, 2007, TBCAM voluntarily waived a portion of its investment advisory fee in the amount of $99,997 and reimbursed the Fund for $58,342 of its operating expenses. This arrangement is voluntary and temporary and may be discontinued or revised by TBCAM at any time. The Trust entered into an agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel and facilities to perform transfer agency and certain shareholder services for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based fees, as well as, out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $6,033, for the year ended September 30, 2007. The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide custody, administration and accounting services for the Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset and transaction based fees, as well as out-of-pocket expenses. Pursuant to this agreement, the Fund was charged $96,525 for the year ended September 30, 2007. The Trust also entered into an agreement with Mellon Bank to perform certain securities lending activities and to act as the Fund's lending agent. Mellon Bank receives an agreed upon percentage of the net lending revenues. Pursuant to this agreement, Mellon Bank earned $2,254 for the year ended September 30, 2007. See Note 7 for further details. The Trust entered into two separate agreements with The Bank of New York that enables the Fund, and other funds in the Trust, to borrow, in the aggregate, (i) up to $35 million from a committed line of credit and (ii) up to $15 million from an uncommitted line of credit. Interest is charged to each participating fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. The participating funds also pay an annual fee, computed at a rate of 0.020 of 1% of the committed and uncommitted amounts and allocated ratably to the participating funds. In addition, a facility fee, computed at an annual rate of 0.060 of 1% on the committed amount, is allocated ratably among the participating funds at the end of each quarter. Pursuant to these agreements, the Fund was charged $142 for the year ended September 30, 2007, which amount is included in miscellaneous expenses on the statement of operations. See Note 8 for further details. The Trust reimburses BNY Mellon Asset Management for a portion of the salary of the Trust's Chief Compliance Officer. For the year ended September 30, 2007, the Fund was charged $4,235, which amount is included in miscellaneous expenses in the statement of operations. No other director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Fund pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out-of-pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. The Trust has contracted Mellon Investor Services LLC, a wholly owned subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and fulfillment services for the Fund. Pursuant to this agreement, the Fund was charged $1,275, which amount is included in miscellaneous expenses in the statement of operations, for the year ended September 30, 2007. 17 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- The Fund may pay administrative service fees. These fees are paid to affiliated or unaffiliated retirement plans, omnibus accounts and platform administrators and other entities ("Plan Administrators") that provide record keeping and/or other administrative support services to accounts, retirement plans and their participants. As compensation for such services, the Fund may pay each Plan Administrator an administrative service fee in an amount of up to 0.15% (on an annualized basis) of the Fund's average daily net assets attributable to Fund shares that are held in accounts serviced by such Plan Administrator. The Fund's adviser or its affiliates may pay additional compensation from their own resources to Plan Administrators and other entities for administrative services, as well as in consideration of marketing or other distribution-related services. These payments may provide an incentive for these entities to actively promote the Fund or cooperate with the distributor's promotional efforts. For the year ended September 30, 2007, the Fund was not charged an administrative service fee by an affiliate of BNY Mellon. Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon Funds Distributor, L.P. as the Fund's principal distributor. Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being the surviving entity of each merger. (3) Purchases and Sales of Investments: Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales ------------ ------------ Non-U.S. Government Securities $ 10,288,333 $ 6,912,414 ============ ============
(4) Shares of Beneficial Interest: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
For the period July 10, 2006 For the (commencement of Year Ended operations) to September 30, 2007 September 30, 2006 ------------------ ------------------ Shares sold 144,213 277,002 Shares issued to shareholders in reinvestment of distributions 2,828 -- Shares redeemed (12,790) -- --------- --------- Net increase (decrease) 134,251 277,002 ========= =========
At September 30, 2007, two shareholders of record, in the aggregate held approximately 72.5% of the total outstanding shares of the Fund. Investment activities of these shareholders could have a material impact on the Fund. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 30 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading in the Fund. The fee does not apply to shares that were acquired through reinvestment of distributions. For the year ended September 30, 2007, the Fund did not assess any redemption fees. (5) Federal Taxes: Each year, the Fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timely distributions of its income to its shareholders, and the diversification of its assets, the Fund will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain which are distributed to shareholders. 18 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- In July 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implication of FIN 48 and its impact in the financial statements has not yet been determined. The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows: Cost for federal income tax purposes $10,179,210 =========== Gross unrealized appreciation $ 3,768,799 Gross unrealized depreciation (64,578) ----------- Net unrealized appreciation (depreciation) $ 3,704,221 =========== Undistributed ordinary income $ 783,636 Undistributed capital gains 149,365 ----------- Total distributable earnings $ 933,001 ===========
The tax character of distributions paid during the fiscal year ended September 30, 2007 was as follows:
2007 ----------- Ordinary income $ 78,456 ===========
(6) Financial Instruments: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The Fund may trade the following financial instruments with off-balance sheet risk: Forward Foreign Currency Exchange Contracts The Fund may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any appreciation or depreciation are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward foreign currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward foreign currency exchange contracts is included in the Statement of Assets and Liabilities. At September 30, 2007, the Fund held forward foreign currency exchange contracts. See Schedule of Investments for further details. (7) Security Lending: The Fund may lend its securities to financial institutions which the Fund deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the 19 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Notes to Financial Statements -------------------------------------------------------------------------------- securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. The Fund loaned securities during the year ended September 30, 2007 and earned interest on the invested collateral of $12,348 of which $7,014 was rebated to borrowers or paid in fees. At September 30, 2007, the Fund had securities valued at $277,977 on loan, of which $271,348 was collateralized with cash and $15,092 was collateralized with highly liquid securities. See Schedule of Investments for further detail on the security positions on loan and collateral held. (8) Line of Credit: On behalf of the Fund and other funds in the Trust, the Trust has access to a credit facility, which enables each fund to borrow, in the aggregate, up to $35 million under a committed line of credit and up to $15 million under an uncommitted line of credit.For the year ended September 30, 2007, the Fund had average borrowings outstanding of $47,750 for a total of four days and incurred $31 of interest expense. At September 30, 2007, the Fund did not have a loan balance outstanding. 20 Mellon Institutional Funds Investment Trust The Boston Company Emerging Markets Core Equity Fund Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders of The Boston Company Emerging Markets Core Equity Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Boston Company Emerging Markets Core Equity Fund (the "Fund") at September 30, 2007, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period from July 10, 2006 (commencement of operations) to September 30, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 21, 2007 21 Trustees and Officers (Unaudited) The following table lists the Trust's trustees and officers; their age, address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies; and total remuneration paid as of the year ended September 30, 2007. The Fund's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. Independent Trustees
Number of Trustee Principal Portfolios in Other Remuneration Name (Age) Term of Office Occupation(s) Fund Complex Directorships (period ended Address, and Position(s) and Length of During Past Overseen by Held by September 30, Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007) ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $391 61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Weston, MA 02493 ("DRI") (biotechnology 9/30/40 research and consulting firm); formerly Chairman of the Board and Chief Executive Officer, DRI Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $391 c/o Harvard University 9/13/1989 Professor of Political Littauer Center 127 Economy, Harvard Cambridge, MA 02138 University 8/5/44 John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $391 P.O. Box 2333 11/3/1986 House, Inc. (hospice) New London, NH 03257 4/11/35 Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $395 c/o Essex Street Associates 11/3/1986 Associates (family P.O. Box 5600 investment trust office) Beverly, MA 01915 11/14/43
Interested Trustees * None* *Effective October 30, 2007, J. David Officer was elected as a Trustee of the Trust. 22 Principal Officers who are Not Trustees
Name (Age) Term of Office Address, and Position(s) and Length of Principal Occupation(s) Date of Birth Held with Trust Time Served During Past 5 Years ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann (46) * President, Chief President and CEO Senior Vice President and Head of Operations, BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments Boston, MA 02108 2/20/61 Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller, BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC 7/14/65 Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly One Boston Place Vice President and Manager, Mutual Fund Operations, Boston, MA 02108 Standish Mellon Asset Management Company, LLC 8/19/51 Mary T. Lomasney (50) Chief Since 2005 First Vice President, BNY Mellon Asset Management and BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior Boston, MA 02108 Vice President, State Street Research & Management 4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive Officer and Secretary of the Trust, and J. David Officer was elected as President and Chief Executive Officer of the Trust. **Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the Trust. 23 THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK MELLON INSTITUTIONAL FUNDS One Boston Place Boston, MA 02108-4408 800.221.4795 www.melloninstitutionalfunds.com 6914AR0907 Item 2. Code of Ethics. The Registrant has adopted a Code of Ethics, as defined in Item 2(b) of Form N-CSR, that applies to the Principal Executive Officer and Principal Financial Officer. For the fiscal year ended September 30, 2007, there were no amendments to a provision of the Code of Ethics nor were there any waivers granted from a provision of the Code of Ethics. A copy of the Registrant's Code of Ethics that applies to the Principal Executive Officer and Principal Financial Officer is filed as an exhibit to this Form N-CSR under item 12(a)(1). Item 3. Audit Committee Financial Expert. (a) AUDIT FEES: The aggregate fees billed for professional services rendered by the Registrant's principal accountant, PricewaterhouseCoopers LLP, for the audit of the Registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended September 30, 2007 and 2006 were $375,000 and $741,015, respectively. (b) AUDIT-RELATED FEES: The aggregate fees billed for the fiscal years ended September 30, 2007 and 2006 for assurance and related services by PricewaterhouseCoopers LLP that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item were $19,000 and $61,000, respectively. The nature of the services comprising the fees disclosed under this Item for both years consist of the examination of securities and similar investments of the Registrant's investment series pursuant to the requirements of Rule 17f-2 under the Investment Company Act of 1940. (c) TAX FEES: The aggregate fees billed for the fiscal years ended September 30, 2007 and 2006 for professional services rendered by PricewaterhouseCoopers LLP for tax compliance, tax advice, and tax planning were $0 and $260,010, respectively. (d) ALL OTHER FEES: Other than the services reported in paragraphs (a) through (c) of this Item, PricewaterhouseCoopers LLP billed no other fees for products or services provided for the fiscal years ended September 30, 2007 and 2006. (e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICY: The Registrant's audit committee pre-approves all audit and non-audit services to be performed by the Registrant's accountant before the accountant is engaged by the Registrant to perform such services. (e) (2) 100% of the services described in each of paragraphs (b) through (d) of this Item 4 were pre-approved by the Registrant's audit committee before the accountant was engaged by the Registrant to perform such services. (f) Not applicable. (g) The aggregate non-audit fees billed by PricewaterhouseCoopers LLP for services rendered to the Registrant and the Registrant's investment advisers, and any entity controlling, controlled by or under common control with the advisers that provides ongoing services to the Registrant for the fiscal years ended September 30, 2007 and 2006 were $0 and $0, respectively. The aggregate non-audit fees billed by the Registrant's accountant for services rendered to the Registrant's transfer agent by PricewaterhouseCoopers LLP for the fiscal years ended September 30, 2007 and 2006 were $98,628 and $105,570, respectively. Services provided in both years included a review of the transfer agency function and to issue a report under Rule 17Ad-13(a)(3) of the Securities and Exchange Act of 1934. (h) The Registrant's Audit Committee of the Board of Trustees had pre-approved all of the non-audit services that were rendered to the Registrant's investment advisers and any entity controlling, controlled by, or under common control with the investment advisers that provides ongoing services to the Registrant, and no such non-audit services were not pre-approved. Item 5. Audit Committee of Listed Registrants. Not applicable to the Registrant. Item 6. Schedule of Investments Included as part of the report to shareholders filed under Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable to the Registrant. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to the Registrant. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable to the Registrant. Item 10. Submission of Matters to a Vote of Security Holders. There have been no material changes. Item 11. Controls and Procedures. (a) The Registrant's Principal Executive Officer and Principal Financial Officer concluded that the Registrant's disclosure controls and procedures are effective based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date" as defined in Rule 30a-3(c) under the Investment Company Act of 1940). (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 that occurred during the Registrant's second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of Ethics required by Item 2 is attached hereto as an exhibit. (a)(2) Certifications of the Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 are attached hereto as Exhibit 99CERT.302 (b) Certifications as required by Rule 30a-2(b) under the Investment Company Act of 1940 and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99CERT.906. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Mellon Institutional Funds Investment Trust By (Signature and Title): /s/ DENISE B. KNEELAND -------------------------------------------- Denise B. Kneeland, Assistant Vice President and Secretary Date: December 7, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities, and on the dates indicated. By (Signature and Title): /s/ J. DAVID OFFICER -------------------------------------------- J. David Officer, President and Chief Executive Officer Date: December 7, 2007 By (Signature and Title): /s/ STEVEN M. ANDERSON -------------------------------------------- Steven M. Anderson, Vice President, Treasurer and Chief Financial Officer Date: December 7, 2007